H  F 


UC-NRLF 


Accounting  Students'  Series 


Syllabus  of  Bookkeeping 


BY 


Samuel  F.  Racine 
Certified  Public  Accountant 


1920 


Accounting  Students'  Series 


Syllabus  of  Bookkeeping 

BY 

Samuel  F.  Racine 
Certified  Public  Accountant 


1920 


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COPYRIGHT  1918 

BY 

SAMUEL  F.  RACINE 


COPYRIGHT  1920 

BY 

SAMUEL  F.  RACINE 


425608 


PUBLISHED    BY 

THE  WESTERN  INSTITUTE  OF  ACCOUNTANCY 

COMMERCE  AND  FINANCE 

LEARY  BLDG.  SEATTLE,  WASH. 


Accounting  Students'  Series 

Graded  Corporation  Problems,  1914  and  1918;  containing 
the  most  severe  C.  P.  A.  examination  problems  used  up  to  the 
year  of  publication,  1914;  since  revised  and  brought  down  to 
date,  1918. 

Guide  to  the  Study  of  Accounting,  1916;  similar  to  the 
preceding  Guide  to  the  Study  to  Accounting,  but  practically  a  new 
book,  owing  to  the  advent  of  new  books  of  recognized  authority. 

Guide  to  the  Study  of  Auditing,  1916.  The  publication  of 
a  new  Montgomery's  Auditing  required  that  the  original  Guide  to 
Auditing  be  rewritten,  hence  the  1916  book. 

Practical  Problems,  Series  "A,"  1916 ;  containing  the  great 
majority  of  the  C.  P.  A.  examination  questions  used  in  the  State 
of  Washington.    This  book  has  been  revised  three  times. 

Accounting  Principles,  1917.  A  new  book  originally  writ- 
ten in  1913,  containing  much  subject  matter  not  found  in  other 
books  on  accounting.  Assuredly  it  contains  more  information 
than  any  other  single  book  on  the  subject. 

Annuity  Studies,  1918 ;  a  set  of  rules  easy  to  understand, 
with  problems  on  annuities. 


PREFACE 

This  book  is  so  original  and  so  new  and  unusual  in  form 
and  purpose  that  we  hardly  expect  it  to  meet  with  universal 
favor ;  however,  the  Western  Institute  of  Accountancy,  Commerce 
and  Finance  has  been  using  it  in  its  class  rooms  for  a  considerable 
period  and  has  found  it  just  the  thing  for  its  purposes. 

It  is  intended  to  serve  as  a  basis  for  a  lecture  course  for 
students  who  are  just  starting  the  study  of  accounting.  It  has 
been  found  too  advanced  for  bookkeeping  students. 

In  the  classrooms  of  the  Western  Institute  of  Accountancy, 
Commerce  and  Finance,  the  instructors  lecture  on  a  chapter, 
demonstrating  and  illustrating  where  possible ;  using  the  text 
as  a  guide  but  amplifying  it  wherever  possible.  They  even  go  so 
far  as  to  give  suggestions  and  information  on  the  questions  fol- 
lowing each  chapter ;  care  being  taken  to  cover  the  whole  ground 
thoroughly  and  minutely. 

The  students  are  provided  with  copies  of  the  Syllabus  with 
which  they  follow  the  lecture  and  in  which  they  make  notes  of 
points  not  shown  in  the  text  or  for  the  purpose  of  amplifying 
the  notes  already  given.  They  also  use  it  for  the  purpose  of 
studying  and  solving  the  questions  at  the  end  of  each  chapter. 

Like  all  new  books,  the  Syllabus,  no  doubt,  is  incomplete. 
It,  however,  provides  a  start  and  we  hope  will  ultimately  be  a 
book  worth  while.  While  little  is  claimed  for  it,  much  is  hoped 
for  it  and  we  offer  it  to  you  in  the  belief  that  you  will  at  least 
try  it  with  your  classes  as  we  have  done,  before  you  cas+  it  aside. 
If  you  will  try  it,  we  feel  sure  you  will  find  it  a  new  and  effective 
means  of  teaching  bookkeeping. 

There  are  but  three  ways  to  learn  anything,  seeing — doing — 
hearing.  Seeing  bv  reading,  and  doing  bv  thinking  or  workine. 
were  the  only  practical  methods  open  to  the  bookkeeping  student ; 
the  Syllabus  now  provides  a  means  whereby  lectures  may  be  given 
which  makes  the  third  method  of  learning — hearing — possible, 
also  by  the  aid  of  the  numerous  demonstrations  provided  by  the 
Syllabus,  which  require  the  use  of  a  blackboard,  seeing,  is  used 
as  well,  as  an  assistant ;  furthermore  that  greatest  of  all  means 
of  learning — doing — applying  the  information  gained  bv  seeing 
and  hearing — is  brought  to  those  who  use  the  Syllabus  by  the 
aid  of  the  numerous  practical  questions  contained  therein,  therebv 
making  this  work  complete  as  a  means  of  reaching  the  minds  of 
the  students,  some  of  whom  learn  by  seeing;  others  by  hearing, 
and  still  others  by  doing. 


SYLLABUS  OF  BOOKKEEPING 


INDEX. 

1.  Definition  7 

2.  Object    7 

3.  Principles  8 

A.  Single  Entry  8 

B.  Double  Entry 8 

4.  Methods  10 

A.  Recording  Accounts  Due  10 

B.  Recording  Indebtedness  10 

C.  Recording  Investment  10 

D.  Recording  Changes  in  Net  Worth 11 

E.  Controlling  Property  11 

5.  Accounts  Representing  Property  14 

A.  Current  14 

B.  Fixed  14 

C.  Passive  14 

6.  Accounts  Representing  Liabilities  '. 14 

A.  Current    14 

B.  Fixed  or  Funded 14 

C.  Contingent  15 

7.  Accounts  Representing  Credits  to  Revenue  17 

A.  Ordinary  Business  Profit 17 

B.  Extraordinary  Profit 17 

8.  Accounts  Representing  Debits  to  Revenue 20 

A.  Offset  to  Sales 20 

B.  Elements  of  Cost,  Direct  21 

C.  Elements  of  Cost,  Indirect 21 

D.  Elements  of  Trading  22 

E.  Elements  of  Administration  22 

F.  Extraordinary  Expenses  or  Losses 23 

9.  Subsidiary  Accounts 27 

A.  In  General  27 

B.  Offsets 28 

C.  Adjuncts 29 

10.    Mixed  Accounts  31 

A.  Defined  31 

B.  Merchandise  31 

C.  Interest  and  Discount 31 

D.  Freight  and  Express 32 

E.  Plant  32 

F.  Goodwill  33 

G.  Treasury  Stock 34 


SYLLABUS  OF  BOOKKEEPING 


11.  Analysis  of  Specific  Accounts 37 

A.  Purchases 37 

B.  Sales  37 

C.  Inventory  37 

D.  Cash 38 

E.  Investments  39 

F.  Organization  Expense , 40 

G.  Machinery  40 

12.  Collective  Accounts 44 

A.  Cash  Sales 44 

B.  Cash  Purchases  44 

C.  Controlling  Accounts  44 

D.  Trial  Balance  45 

13.  Capital  and  Revenue  50 

A.  Importance 50 

B.  Definition  50 

C.  Distinction  51 

D.  Operation , 51 

E.  Exceptions  52 

14.  Accounts  Showing  Progress  56 

A.  Trading  Accounts  56 

B.  Profit  and  Loss  Accounts 58 

C.  Administration  Section  or  Account  58 

D.  Manufacturing  Accounts 59 

E.  Net  Profit 59 

F.  Appropriation  Account  59 

G.  Miscellaneous 59 

H.  Forms  59 

I.    Deficiency  Account  62 

J.    Disposition  of  Profits 62 

15.  Accounts  Showing  Effect  65 

A.  Statement  of  Affairs  65 

B.  Statement  of  Assets  and  Liabilities  66 

C.  Balance  Sheets ^ 

16.  Original  Records  74 

A.  Journals  74 

B.  Sales  Books  75 

C.  Purchase  Books 75 

D.  Cash  Records  76 

17.  Miscellaneous  Books  of  Account 80 

A.  Final  Records  80 

B.  Original  and  Final  Records 81 

C.  Special  Classified,  Tabular  or  Columnar  Journal 82 


SYLLABUS  OF  BOOKKEEPING 


11.  Analysis  of  Specific  Accounts 37 

A.  Purchases 37 

B.  Sales  37 

C.  Inventory  37 

D.  Cash 38 

E.  Investments  39 

F.  Organization  Expense 40 

G.  Machinery  40 

12.  Collective  Accounts 44 

A.  Cash  Sales  .' 44 

B.  Cash  Purchases  44 

C.  Controlling  Accounts  44 

D.  Trial  Balance  45 

13.  Capital  and  Revenue  50 

A.  Importance 50 

B.  Definition  50 

C.  Distinction  51 

D.  Operation , 51 

E.  Exceptions  52 

14.  Accounts  Showing  Progress  56 

A.  Trading  Accounts  56 

B.  Profit  and  Loss  Accounts 58 

C.  Administration  Section  or  Account  58 

D.  Manufacturing  Accounts 59 

E.  Net  Profit 59 

F.  Appropriation  Account  59 

G.  Miscellaneous 59 

H.  Forms  59 

I.    Deficiency  Account  62 

J.    Disposition  of  Profits 62 

15.  Accounts  Showing  Effect  65 

A.  Statement  of  Affairs  65 

B.  Statement  of  Assets  and  Liabilities  66 

C.  Balance  Sheets 66 

16.  Original  Records  74 

A.  Journals  74 

B.  Sales  Books  75 

C.  Purchase  Books 75 

D.  Cash  Records  76 

17.  Miscellaneous  Books  of  Account 80 

A.  Final  Records  80 

B.  Original  and  Final  Records 81 

C.  Special  Classified,  Tabular  or  Columnar  Journal 82 


'  "''SYLLABUS  OF  BOOKKEEPING  1 

BOOKKEEPING 

1.  DEFINED: 

A   means   of    recording   information    in    a    systematic 
manner. 

2.  OBJECT: 

A.  To  record  information  for  the  purpose  of: 

1.  Recording  accounts  due. 

Illustration — "A"  owes  "B"  $10.00.  "B"  will  have  an  account 
showing  this  item. 

2.  Securing  a  record  of  indebtedness. 
Illustration — "B's"  account  in  "A's"  books. 

3.  Recording  the  investment. 

Illustration — The  account  of  the  proprietor  in  a  business. 

4.  Recording  changes  in  net  worth. 
Illustration — 

A  Profit  and  Loss  Account. 
Gross  Profit  on  Sales.  Cr. 
Expenses,  Dr.,  and  Net  Profit,  Dr. 

5.  A  control  of  Property. 

Illustration — Machine  account  representing  a  list  of  adding  ma- 
chines in  stock,  carried  at  cost  price  by  an  adding  machine 
manufacturer. 

^'-Demonstration— The  John  Doe  Adding  Machine  Company 
ships  to  their  branch  office  in  Spokane  10  model  E  machines 
which  have  a  list  price  of  $250.00  each. 
The  entry  is : 

Spokane  office  consigned  stock $  2,500.00 

Spokane  office  consignment  account,  or 

consignment  sales $  2,500.00 

The  Spokane  Branch  reports  the  sale  of 
three  machines.    If  the  Executive  office 
keeps   the   books   for   the   branch,   the 
entry  will  be : 
Spokane  office  consignment  account....$     750.00 

Spokane  office  consigned  stock $     750.00 

To  correct  stock  control, 
and 

Spokane  Account  Receivable $     750.00 

Sales $     750.00 


SYLLABUS  OF  BOOKKEEPING  3  A 

3.    PRINCIPLES: 

A.  Single  or  Simple  Entry. 

1.  Where    ledger    only    is    kept;    debit    individuals    with 

amount  he  owes  or  receives ;  credit  individuals  with 
amounts  we  owe  or  he  has  paid. 

2.  Where  daybook  only,  or  daybook  and  cash  book  are 
used  in  addition  to  the  ledger ;  debit  and  credit  as  above, 
but  debits  in  ledger  will  equal  debits  in  books  of  original 
entry  and  credits  in  ledger  will  equal  credits  in  books  of 
original  entry. 

Illustration — If  the  total  debits  in  day  book  and  credits  in  the 
cash  book  total  $4,510.00.  and  they  are  the  source  of  all  debit 
items  in  the  ledger,  the  total  debits  posted  to  the  ledger  will 
equal  $4,510.00  also. 

B.  Double  Entry. 

1.  Theoretical  Double  Entry. 

Note — All  entries  other  than  to  personal  accounts  are  but  the 
record  of  a  change  in  the  net  worth  of  the  proprietor,  hence : 
Rule — Debit  the  proprietor  with  all  items  which  reduce  his  net 
worth  and  credit  him  with  all  items  which  increase  it;  credit- 
ing or  charging  the  person  or  thing  which  produced  the  change 
with  the  complement  of  the  amount. 
Note — In  double  entry,  debits  and  credits  must  equal. 

j  2.  Practical  Double  Entry. 

Note— The  same  rule  applies,  but  in  lieu  of  a  direct  entry  to  the 
proprietor's  account  an  entry  is  made  to  some  account  of  a  group 
of  accounts  which  are  placed  on  the  books  to  represent  the  vari- 
ous activities,  properties,  or  responsibilities  of  the  proprietor. 
Illustration — Sales,  expenses  and  purchases  represent  his  activi- 
ties. Inventories,  land,  and  cash  represent  his  properties. 
Notes  payable,  etc.,  represent  his  responsibilities. 


SYLLABUS  OF  BOOKKEEPING  3  Q 

QUESTIONS 

1.  Define  bookkeeping  and  state  a  number  of  objects  of  keeping  books. 

2.  What  manner  of  record  would  be  made  to  record  the  following: 

a.  The  amount  due  from  a  customer? 

b.  The  amount  owed  a  customer? 

c.  An  investment  of  $2,000.00  in  a  business? 

3.  The  Porpoise  Adding  Machine  Company  ships  adding  machines  to  its 
branch  office,  maintaining  a  control  of  the  stock  on  hand  at  the  branches 
by  the  aid  of  monetary  controlling  accounts.  How  would  it  record  the 
shipment  of  machines  to  the  branches ;  also  how  would  the  disposal  of 
machines  by  the  branch  be  recorded  ? 

4.  Outline  the  principles  of  single  entry  bookkeeping? 

5.  How  does  single  entry  differ  from  double  entry? 

6.  How  may  the  accuracy  of  the  postings  to  a  single  entry  ledger  be 
proved  where  a  day  book  and  a  cash  book  are  used  as  original  records  ? 

7.  What  are  the  principles  of  double  entry? 

8.  How  is  the  equilibrium  of  debits  and  credits  maintained  in  double 
entry  ? 

9.  What  accounts  represent  the  activities  of  the  proprietor  and  what  ones 
represent  his  responsibilities? 

10.    Prepare  a  problem,  the  solution  of  which  will  illustrate  some  point 
brought  out  in  this  lesson. 


SYLLABUS  OF  BOOKKEEPING  4  A 


4.    METHODS: 

A.  Recording  Amounts  Due. 

Illustration — Ledger  account  with  credit  and  debit  sides ;  the 
account  heading  showing  the  name  of  the  debtor  and  the  account 
containing  a  number  of  debit  items  with  the  payments  of  a  por- 
tion thereof. 

B.  Recording  Indebtedness. 

Illustration — Same  as  "A,"  but  excess  of  items  on  credit  side. 

C.  Recording  Investments. 

1.  Sole  trader. 

Illustration — The  Capital  account  of  "A"  consists  of  an  invest- 
ment of  $8,000.00. 

2.  Partners. 

a.  Where  no  predetermined  amount  is  invested  or  required. 
Illustration — "A"  and  "B"  each  invest  $10,000  in  a  business :  "A" 
invests  $1,000.00  more  in  thirty  days.  All  items  are  recorded  in 
the  same  accounts. 

b.  Where  amount  of  capital  has  been  agreed  upon. 

Illustration — "A"  and  "B"  each  agree  to  invest  and  maintain  a 
capital  of  $10,000.00.  This  item,  only,  appears  in  each  investment 
account,  and  in  the  case  of  profits  or  investments  in  excess  of 
the  amount  agreed  upon,  or  deficiencies  of  investments,  the 
items  are  carried  in  a  separate  "Personal  Account"  to  the  credit 
or  debit  of  the  partner. 


"Demonstration — "A,"    "B"   and   "C"   each   agree   to   invest 
$25,000.00  in  a  business.     "A"  invests  $25,000.00,  but  "B"  and 
•  "C"  invest  but  $20,000.00  each.    How  should  their  accounts  treat 
the  deficiency? 

Answer — "B"  and  "C"  personal  debit  $5,000.00  each. 

3.  Corporation. 

a.  Capital  Stock  Account. 

Note — Identity  of  individuals  is  lost;  instead  thereof,  the  stock 
they  hold  is  represented  on  the  bookst  This  is  due  to  the  control 
of  the  company  by  the  stock  instead  of  by  the  individuals. 
IPP* Demonstration — The  John  Doe  Corporation  is  formed  by 
J  no.  Doe  and  J.  Smith  with  a  capital  of  $15,000.00.  Doe  takes 
100  shares,  and  Smith,  50  shares.  How  would  the  accounts 
appear? 

Answer — Capital  Stock  account  in  General  Ledger,  credit  $15,- 
000.00.  Individual  names  do  not  appear.  In  some  other  record, 
usually  a  Stock  Ledger,  the  record  of  individual  holdings  is 
kept. 

Note — Loans  from,  or  advances  to,  stockholders  or  officers  are 
recorded  separately. 

Illustration — Doe  borrows  $100.00  of  the  company  and  Smith 
loans  $400.00  to  the  company.  Personal  accounts  appear  in  the 
ledger  for  these  items.  They  are  not  included  as  Accounts 
Receivable  or  Accounts  Payable,  however,  on  account  of  pos- 
sible misrepresentation  of  a  balance  sheet. 


10 


SYLLABUS  OF  BOOKKEEPING  4D 

D.  Recording  Change  in  Net  Worth. 

1;  By  crediting  the  proprietors  direct  as  in  single  entry, 

after  ascertaining  the  change  in  net  worth  by  comparing 

the  net  worth  at  the  end  of  a  fiscal  period  with  the  net 

worth  at  the  beginning  of  the  period. 

Illustration — The  net  worth  of  P.  Smith  of  June  30th  is  $14,- 
000.00.  On  January  1st,  his  net  worth  was  but  $10,000.00.  An 
increase  of  $4,000.00  has  resulted.  This  is  added  to  the  credit 
side  of  his  investment  account. 

Note — Additional  investments,  appreciations  of  properties,  and 
profits  from  outside  sources  must  be  deducted  from  the  final 
net  worth,  and  withdrawals  and  losses  from  outside  sources 
must  be  added,  to  ascertain  the  true  profit  of  the  business. 
Note— When  the  statement  of  assets  and  liabilities,  with  the 
proprietorship  added,  balance,  the  statement  is  in  double  entry 
form,  and  double  entry  books  may  be  opened  by  entering  all 
items  therein ;  or  single  entry  books  may  be  changed  to  double 
entry  by  entering  in  the  ledger  all  items  on  the  statement  which 
are  not  in  the  books. 

2.  By  keeping  accounts  with  the  different  elements  of  a 
business  transaction  and  summarizing  the  information 
they  contain  from  time  to  time  as  the  information  is 
desired. 

Illustration — "A"  sells  goods  to  "B"  for  $500.00  at  an  expense 
of  $50.00.  The  component  parts  of  the  transaction  are  a  sale 
and  an  expense.  Accounts  will  be  kept  for  "Sales"  and  "Ex- 
penses." Ultimately  these  accounts  will  be  summarized,  with 
many  other  items  and  accounts,  to  show  the  profit  or  loss  of  the 
period. 

E.  Controlling  Propertv. 

1.  By  an  account  containing  a  record  at  cost  price. 

Note — Property  account  of  a  real  estate  office  shows  each  tract, 
at  cost,  with  additions  thereto,  at  cost.  The  cost  of  each  tract 
sold  is  credited  to  this  account,  and  the  balance  of  Property 
Account  represents  the  cost  of  the  property  remaining  unsold. 

!W Demonstration — The  property  account  of  the  Acme  Realty 
Company  shows  tract  "A"  $5,000.00,  "B"  $900.00,  "C"  $1,000.00, 
"D"  $500.00.  Tract  "A"  is  sold  for  $5,500.00,  and  tract  "B"  at 
$800.00.  Credit  the  property  with  the  book  value  in  each  case 
and  adjust  the  difference  by  an  entry  to  "Gross  Profit  on  Real 
Estate  Sales." 

2.  By  an  account  containing  a  record  at  an  arbitrary  price. 
Illustration — A  branch  office  is  charged  with  goods  at  an  arbi- 
trary percentage  from  selling  price;  this  enables  the  executive 
office  to  keep  a  control  of  the  stock  and  also  sets  a  margin  of 
profit  within  which  the  branch  must  keep  its  expense  to  show 
a  profit. 

Note — Executive  office  must  recast  the  figures  to  determine  true 
profits. 

3.  By  an  account  containing  a  record  at  selling  price. 

Illustration — Same  as  above,  but  now  branch  office  books  will 
not  show  profits  or  losses  on  sales. 

Note — This  form  of  control  is  seldom  used  by  branches  except 
where  branch  accounts  are  kept  on  Executive  office  books  as  in 
2  A  5.  Its  practical  use  is  in  connection  with  department  stores, 
where  auxiliary  records,  carried  at  selling  price,  control  the 
stock  of  each  department. 

11 


SYLLABUS  OF  BOOKKEEPING  4  Q 


QUESTIONS 

1.  Smith,  White  and  Brown  agree  to  engage  in  business  for  a  certain 
period  and  to  invest  $40,000.00,  $50,000.00  and  $10,000.00  respectively. 
Instead,  however,  they  bring  into  the  concern  $30,000.00,  $60,000.00  and 
$5,000.00  respectively.    How  should  their  accounts  appear  in  the  ledger? 

2.  Explain  how  accounts  with  stockholders  are  kept  by  a  corporation? 

3.  Peter  Simpson's  records  show  the  following  assets  and  liabilities  as  of 
Jan.  1st : 

Cash  $  2,500.00      $ 

Accounts  Receivable  10,000.00 

Plant  5,000.00 

Inventory  5,000.00 

Accounts  Payable  12,000.00 

Six  months  later  the  following  figures  are  found  to  be  correct : 

Cash   $  2,000.00      $ 

Accounts  Receivable  12,000.00 

Plant  10,000.00 

Inventory  4,500.00 

Accounts  Payable  10,000.00 

(a)  What  profit  did  he  make  during  the  period? 

(b)  What  particular  items  absorbed  the  profit? 

(c)  Had  the  $5,000.00  increase  in  the  plant  accornt  been  but  a  recorded 
change  in  market  values  of  the  plant  land,  what  would  the  profit 
of  the  business  have  been? 

(d)  Suppose  his  drawing  in  excess  of  salary  were  $25,000.00,  what 
would  his  profits  be,  giving  consideration  to  (c)  also? 

(e)  How  would  this  change  in  net  worth  be  recorded  in  his  books 
bearing  in  mind  that  they  are  kept  by  single  entry? 

4.  Peter  Simpson  (question  3)  wishes  to  keep  his  books  by  double  entry. 
How  may  this  be  accomplished? 

5.  On  January  1st,  a  certain  merchant  had  assets  and  liabilities  as  follows: 
Cash,  $5,000.00;  Horses  and  Wagons,  $2,000.00;  Real  Estate,  $3,000.00; 
Inventories,  $8,000.00;  Accounts  Receivable,  $12,000.00;  Accounts  Pay- 
able, $9,000.00;  Notes  Payable,  $3,000.00.  During  the  year,  he  received 
$4,000.00  from  the  estate  of  a  deceased  uncle  which  he  invested  in 
the  business ;  he  increased  his  real  estate  account  $5,000.00  to  give  effect 
to  an  increase  in  its  value  due  to  the  construction  of  a  new  waterway, 
by  the  port,  which  made  the  property  much  more  valuable.  He  drew 
out,  as  salary,  $150.00  per  month  and  also  for  personal  use  $1,000.00. 
At  the  end  of  the  year,  he  had:  Cash,  $8,000.00;  Horses  and  Wagons. 
$2,000.00,  less  10%  depreciation;  Real  Estate,  $8,000.00;  Inventories, 
$10,000.00;  Accounts  Receivable,  $15,000.00;  and  owed  on  notes 
$4,000.00,  and  on  open  accounts  $6,O0O.OO.  What  profit  did  he  receive 
from  the  business  during  the  year? 

6.  A  jeweler  keeps  a  stock  record  of* his  goods  with  a  monetary  con- 
trolling account  therefor  in  his  ledger.  Prepare  journal  entries  to 
record  the  following : 

(a)  Purchase  for  cash  of  four  diamond  rings  @  $350.00  each. 

(b)  The  sale  of  one  of  the  rings  @  $400.00. 

Note — Use  accounts :    Cash,  Inventory  at  cost,  Gross  Profit. 

7.  The  John  Doe  Real  Estate  Company  acquired  a  tract  of  ground  for 
$30,000.00.     They  expended  $10,000.00  upon  it  and  then  divided  it  into 
lots  upon  which  they  placed  market  values  as  follows :    No.  1,  $3,000.00 
No.  2,  $3,500.00;  No.  3,  $4,000.00;  No.  4,  $4,500.00;  No.  5,  $5,000.00 
No.  6,  $5,500.00;  No.  7,  $6,000.00;  No.  8,  $6,500.00;  No.  9,  $7,000.00 
No.  10,  $7,500.00;  No.  11,  $7,500.00. 

They  sold  tracts  Nos.  1,  3,  4,  5,  8  and  11  at  the  above  prices,  and 
Nos*  2  and  6  at  a  discount  of  10%  from  list  price. 

Ascertain  the  cost  of  each  tract  by  finding  the  ratio  that  the  total 
cost  of  all  the  tracts  bears  to  the  total  market  price  of  all  the  tracts 
and  applying  the  ratio  to  the  market  price  of  each  tract,  and  open  a 


12 


1 


SYLLABUS  OF  BOOKKEEPING  4  Q 

journal  and  a  ledger  with  accounts  for  each  tract,  cash,  discount,  and 
gross  profit  on  real  estate  sales. 

The  expenses  of  the  selling  organization  are  as  follows : 

Salaries $3,000.00 

Commission  6,000.00 

Rent  and  Incidentals  4,000.00 

All  of  these  were  paid  in  cash. 

After  journalizing  the  above,  make  journal  entries  to  transfer  the 
gross  profit  and  the  expense  accounts  to  a  profit  and  loss  account. 

8.  The  Elgin  Manufacturing  Company  operates  a  branch  store  in  Seattle 
to  which  it  bills  its  product  at  the  following  arbitrary  prices : 

No.  1  $4.00 

No.  2  ,.._ 4.50 

No.  3  4.75 

The  inventory  of  the  branch  shows  the  following : 

500  No.  1 , $2,000.00 

600  No.  2 ■. 2,700.00 

800  No.  3 ,  3,800.00 

The  costs  of  the  goods,  including  freight  to  the  branch,  are   No.   1, 

$3.60;  No.  2,  $4.10;  No.  3,  $4.40. 

At  what  value  must  the  inventory  be  computed  for  the  purpose 

of  determining  the  true  profits  of  the  branch? 

During  the  year  the  branch  sold  10,000  No.  1  @  $4.50;  6,000  No.  2 

@  $5.00;  and  5,000  No.  3  @  $5.25,  and  reported  a  net  profit  of  $5,000.00. 

What  was  the  gross  profit  of  the  branch  as  determined    (a)   by  the 

branch  books,   (d)  by  the  executive  office  books;  also   (c)   what  was 

the  actual  net  profit  of  the  branch? 

9.  The  Toochi  Trading  Company  bills  goods  to  one  of  its  branches  as 
follows : 

4,000  Commodity  "A"   @  4.10 $16,400.00 

5,000  Commodity  "B"    @  4.40. 22,000.00 

6,500  Commodity  "C"    @  5.00 32,500.00 

The  branch  reports  sales  for  cash  as  follows : 

January     500  Commodity  "A"  @  4.20. $2,100.00 

400  Commodity  "B"  @  4.50 1,800.00 

200  Commodity  "C"  @  4.75 950.00 


$4,850.00 
A  check  in  full  is  received  from  the  branch.    When  goods  are  shipped 
to  the  branch,   the  executive   office   debits   Branch    Office   Stock,   and 
credits  Branch  Office  Sales. 

What  entries  should  be  made  to  record  the  January  sales,  (a)  for 
the  purpose  of  the  financial  records,  (b)  for  the  purpose  of  stock 
control? 
10.  The  Bon  Ton  Department  Store  keeps  a  control  of  the  stock  in  each 
department  by  the  aid  of  auxiliary  records  wherein  all  goods  are 
charged  to  the  departments  at  unit  selling  prices.  They  keep  the 
auxiliary  books  in  balance  by  a  credit  to  Adjustment  Account. 

At   the   beginning  of  a   particular   period,    Department   "A"   was 
charged  with  $8,000.00.     It  reported  sales  as  follows : 

Regular  price  of 
Regular  Special  special  sales 

1st  $450.00  $200.00  $240.00 

2nd  300.00  100.00  125.00 

3rd  400.00  300.00  350.00 

4th   250.00  *  110.00  150.00 

5th  150.00  100.00  125.00 

6th   800.00  1,000.00  1,250.00 

On  the  third,  price  changes  were  reported  on  certain  goods  of  which 
they  had  400  units  in  stock  of  from  40c  to  65c. 

Required,  entries  in  the  auxiliary  stock  control  records. 


13 


SYLLABUS  OF  BOOKKEEPING  5  A 

ACCOUNTS  REPRESENTING  PROPERTY: 

A.  Current  Assets. 

Defined — Assets  which  are  for  the  temporary  use  of  the 
business,  representing  cash  or  items  which  were  acquired 
for  the  purpose  of  conversion  into  cash. 

1.  Quick  Assets. 

Defined — Cash  or  its  equivalent. 
Illustration — Cash,  Bond  investments. 

2.  Working  Assets. 

Defined — Assets  dealt  in,  or  required  in  manufacturing. 

'Illustration — Merchandise  inventories,  raw  material,  supplies. 

Note — Current  assets  should  be  recorded  at  cost  price  including 
infreight  and  duty. 

3.  Deferred  Assets. 

Defined — Offsets  to  accruing  liabilities. 
Illustration — Prepaid  Insurance. 

B.  Fixed  Assets. 

Defined — Assets  acquired  for  the  permanent  use  of  the 
business. 

Illustration — Plant,  Machinery,  Horses. 

Note — Fixed  Assets  are  recorded  at  cost  and  are  reduced  from 
time  to  time  by  an  amount  representing  the  proportion  of  the 
cost  consumed  through  use  of  the  article  in  the  production  of 
other  things. 

C.  Passive  Assets. 

Defined — Intangible  Assets. 

Illustration — Goodwill. 

Note — Passive  assets  are  recorded  at  cost,  but,  as  in  most  cases 
they  cannot  be  used  in  the  production  of  other  articles,  no 
allowance  need  be  made  to  record  the  value  consumed  as  is 
true  of  fixed  assets. 

ACCOUNTS  REPRESENTING  LIABILITIES: 

A.  Current. 

Defined — Liabilities  maturing  within  the  year  or  current 
fiscal  period. 
Illustration — Accounts  Payable. 

B.  Fixed  or  Funded. 

Defined — Accounts  which,  according  to  their  terms  of  issue, 
mature  after  one  year  (I.  C.  C.  Ruling). 

Illustration — First  Mor'eage  Bonds  Payable. 


14 


SYLLABUS  OF  BOOKKEEPING  6  C 

C.  Contingent. 

Defined — Liability,  the  amount  or  certainty  of  which   is 
not  definite. 

Illustration — Accommodation  Indorsement,  Guarantees,  Bills  Re- 
ceivable Discounted. 

Note — Certain  contingent  liabilities  are  of  such  a  nature  that 
they  cannot  be  lccorded  in  the  books  or,  as  in  the  case  of  legal 
claims  pending,  it  is  inadvisable  to  so  record  them ;  others  may 
and  should  be  recorded. 


^Demonstration — "A"  sells  "B"  a  bill  of  goods,  taking  in 
payment  thereof  a  6%  note  of  $2,000.00  due  in  thirty  days.  This 
note  he  discounted  at  the  bank  at  6%.  Required  entries  in 
detail  to  cove  ■  the  receipt  of  the  note ;  the  receipt  of  the  cash 
when  it  was  discounted ;  the  return  of  the  cash  to  the  bank,  the 
note  having  been  dishonored ;  and,  the  ultimate  payment  of  the 
note  by  the  maker  thereof. 

WHT"D emonstration — Suppose  the  note  had  been  paid  promptly 
at  maturity? 


15 


SYLLABUS  OF  BOOKKEEPING  6  Q 


QUESTIONS 

1.  Define : 

*-  A.  Current  Assets. 

B.  Quick  Assets. 

C.  Working  Assets. 

D.  Deferred  Assets. 

E.  Fixed  Assets. 

F.  Passive  Assets. 

2.  Classify  the  following: 

Plant. 
Machinery. 
Goodwill. 
—     Horses  in  hands  of  dealer. 
Horses  used  for  farm  work. 
Cash. 

Accounts  Receivable. 
Securities. 
Land. 
-    Inventories. 
Prepaid  Rent. 
Stock  in  a  subsidiary  company. 

3.  Give  examples  of  assets  which  are  usually  fixed,  but  which  may  be 
current ;  also  a  number  which  are  usually  current  but  may  be  fixed. 

4.  Give  examples  of:   (a)  Cur-ent  Liabilities,   (b)  Fixed  Liabilities,  (c) 
Contingent  Liabilities. 

5.  Alvin  Jones,  requiring  a  considerable  amount  of  cash,  discounts,  at 
8%,  the  following  notes  at  the  bank : 

T.  E.  Johnson Due  in  45  days— Interest  5%— $500.00 

A.  M.  Jackson Due  in  30  days— Interest  8%—  600.00 

S.  A.  Stone Due  in  20  days— Interest  7%—  600.00 

Johnson  and  Stone  paid  their  notes  at  maturity,  but  Jackson  failed  to 
do  so  with  the  result  that  Jones  was  compelled  to  pay  the  bank  instead. 
Required  entries  in  detail  for  the  above. 

6.  Prepare  a  problem,  the  solution  of  which  will  illustrate  some  point  or 
points  brought  out  in  this  or  preceding  lessons. 


16 


SYLLABUS  OF  BOOKKEEPING  7  A 

7.    ACCOUNTS  REPRESENTING  CREDITS 
TO  REVENUE: 

A.  Ordinary  Business  Profit. 

1.  Sales,  Regular 

a.  In  general. 

Note — Sales  are  divided  to  correspond  with  divisions  of  accounts 
receivable  except  as  in  "f". 

b.  Divisional. 

Illustration — Hay  and  Feed,  handled  by  the  same  department. 
Note — Usually  recorded  in  same  books. 

c.  Departmental. 

Illustration — Wholesale  and  Retail ;  Expense  pertaining  to  each 
being  kept  entirely  separate  as  when  they  are  handled  through 
different  organizations. 
Note — Invariably  recorded  entirely  separate. 

d.  Districts. 

Note — City,  country,  or  according  to  street  and  numbers. 

e.  Salesmen. 

f.  Controlled. 

Sales  price  is  divided  into  cost  and  gross  profit.     (See  4  E  1.) 

2.  Sales,  Salvage. 

Note — A  credit  to  cost,  in  general,  on  large  work ;  but  where 
salvage  is  but  a  saving  of  scrap  as  in  a  manufacturing  jeweler's 
shop  when,  although  it  amounts  to  a  considerable  sum,  the 
saving  per  job  is  small,  it  is  a  credit  to  Net  Profits. 

3.  Sales,  By-products. 

Note — A  separate  source  of  income  but  in  the  regular  line  of 
business.  Cost  of  preparing  salvage  for  sale  as  a  by-product 
is  usually  summarized  with  this  account  to  ascertain  the  profit 
on  the  sale  of  by-product. 

Note — A  by-product  represents  salvage  to  which  labor  or  other 
material  has  been  applied. 

B.  Extraordinary  Profit. 

1.  Cash  Discount  on  Purchases. 

Note — This,  in  general,  is  a  capital  earning  and  is  not  a  deduc- 
tion from  the  cost  of  goods. 

Note — Inventories  are  usually  taken  at  prices  which  do  not  con- 
sider the  cash  discount;  hence  cash  discount  should  not  be 
considered  as  a  reduction  of  cost.  An  exception  to  this  rule  is 
found,  at  times,  in  retail  clothing  stores  where  cash  discount 
is  an  exceptionally  large  item  and  where  invoices  are  entered 
net.  In  this  case,  if  the  store  is  unable  to  pay  in  time  and 
secure  the  discount,  they  debit  the  amount  of  discount  they  are 
compelled  to  pay  to  Discount  Lost. 

2.  Earning  from  Outside  Investments : 

Example — Dividends  ;  Interest. 

Note — See  "Accounting  Principles"  for  treatment  of  dividends 
from  companies  operating  wasting  assets. 

Illustration — During  a  period  of  ten  years,  a  mine  which  cost 
$100,000.00  declares  dividends  of  $150,000.00  and  is  then  aban- 
doned ;  but  $50,000.00  of  the  dividends  is  earnings. 


17 


SYLLABUS  OF  BOOKKEEPING  7  B3 

3.  Earning  from  special  property  acquired  for  the  use  of 
the  business. 

a.  Buildings. 

Illustration — Where  a  building  has  been  erected  for  the  use  of 
a  business  and  where  each  department  is  charged  with  an 
amount  to  represent  the  rental  thereon,  the  building  account 
receives  credit  for  the  rental  charged  and  in  turn  is  charged 
with  the  taxes,  maintenance,  etc.    Usually  a  slight  profit  results. 

b.  Sinking  cmd  Reserve  Fund  Assets. 

Defined — Income  from  assets  acquired  for  the  purpose  of  assur- 
ing the  accumulation  of  a  desired  amount  of  cash  by  a  certain 
date,  or  when  wanted. 

Example — Income  from  a  Sinking  Fund,  or  Reserve  of  Surplus 
for  Fire  Losses. 

Note — Often  the  income  from  Sinking  or  Reserve  Fund  Invest- 
ments is  credited  direct  to  the  Reserve  of  Surplus,  but  as  this 
procedure  does  not  allow  the  showing  of  the  total  earnings  for 
the  period  under  review,  it  is  gradually  being  discontinued. 


18 


SYLLABUS  OF  BOOKKEEPING  7  Q 


QUESTIONS 

1.  Into  what  groups  may  sales  be  divided  and  with  what  should  the  classi- 
fication correspond? 

2.  Into  what  subdivisions  may  the  sales  be  divided  in : 

a.  Department  stores? 

b.  Large  automobile  accessory  houses? 

c.  Wholesale  groceries? 

3.  Distinguish  between  salvage  and  by-products. 

4.  Describe  a  number  of  ways  of  handling  Discounts  on  Purchases. 

5.  Explain  how  a  building  account  may  be  operated  where  the  owners 
thereof  operate  a  highly  departmentalized  organization. 

6.  The  Equator  Heating  Apparatus  Co.  acquires  a  large  building  in  which 
to  conduct  its  operations.  It  charges  its  various  departments  with  rent 
as  follows : 

"A"  $4,000.00 

"B"  _ _ 3,000.00 

"C"   - 3,000.00 

"D"  2,500.00 

The  expenses  incidental  to  the  building  are : 

Taxes  $2,500.00 

Depreciation  5,000.00 

Repairs    1,500.00 

Interest  actually  paid 1,200.00 

Insurance    1,000.00 

Explain  how  these  items  would  be  dealt  with  in  the  accounts ;  show 

the   Real   Estate   Income  Account  in   detail   and   ascertain   the   profit 

derived  on  the  building. 

Is  this  a  true  profit,  or  is  it  but  the  result  of  an  overcharge  to  the 
various  departments? 

7.  Into  what  groups  should  inventories  be  divided? 

8.  Prepare  a  problem,  the  solution  of  which  will  illustrate  some  point,  or 
points,  brought  out  in  this  or  preceding  lessons. 


19 


SYLLABUS  OF  BOOKKEEPING  8  A 

8.    ACCOUNTS  REPRESENTING  DEBITS 
TO  REVENUE: 

A.  Offsets  to  Sales  to  Produce  Gross  Profit. 

1.  Inventories : 

See  3  B  2  Accounts  representing  proprietor's  wealth. 

4  E  1  Accounts  controlling  property  at  cost  price. 

4  E  2  Accounts  controlling  property  at  an  arbitrary  price 
on  branch  books. 

Note — Goods  must  be  revalued  for  inventory  pur- 
poses. 

4  E  3  Accounts  controlling  property  on  branch  books  at 

selling  price. 

Note — See  note  above. 

5  A  2  Working  Assets. 
7  A  1  b  Divisional. 

Note — Divisicnpl  sales  accounts  require  like  divi- 
sion of  inventories  to  facilitate  summarizing. 

7  A  1  c  Departmental. 

Note — Same  as  above. 

7  A  2  Salvage  in  stock. 

7  A  3  By-products  in  stock. 

7  B  1  Discounts  on  Purchases  not  considered. 

2.  Purchases : 

See  3  B  2  Accounts   representing  component  parts  of  a  busi- 
ness transaction. 

4  E  1  Accounts  controlling  property  at  cost  price. 

Note — In  these  cases  (4  E  1-2-3)  purchases  and 
original  inventories  must  be  combined  to  show  the 
total  to  be  accounted  for. 

Illustration — The  Real  Estate  account  represents 
tract  "A"  costing  $500.00,  tract  "B"  costing  $600.00, 
and  tract  "C"  costing  $700.00.  Tract  "D"  is  pur- 
chased at  a  cost  of  $800.00.  The  $800.00  must  be 
debited  to  the  real  estate  account  also. 

4  E  2  Arbitrary  price  used  in  Branch  office  records  only. 

4  E  3  Selling  price  used  in  Branch  office  records  only. 

7  A  1  b  Divisional. 

7  A  1  e  Departmental. 

3.  Infreight : 

a.  Included  in  cost  of  goods  direct,  as  where  price  records, 
etc.,  used  when  inventorying,  shows  values  at  delivered 
price. 

b.  Kept  in  a  separate  account  for  purpose  of  apportionment 
over  goods  sold  and  goods  on  hand  where  the  price  rec- 
ords do  not  include  the  freight  and  where,  in  order  to 
determine  the  amount  of  freight  that  relates  to  the  inven- 
tory, the  above  apportionment  must  be  made. 

1W  Demonstration — Freight  to  the  amount  of  $3,000.00  is 
paid  during  a  certain  fiscal  period.  The  purchases  amount  to 
$6,900.00;  and  the  current  inventory  at  cost  price  amounts  to 
$4,000.00.  Required  the  amount  of  freight  that  may  be  assumed 
as  an  inventory. 

4.  Duty: 

Note — Usually  included  in  the  list  price  of  goods  direct,  although 
method  8  A  3  b  may  be  used  if  desired  and  if  all  goods  are 
imported. 


20 


SYLLABUS  OF  BOOKKEEPING  8  B 

B.  Elements  of  Cost,  Direct. 

1.  Material. 

Note — Cost  of  material  used  is  found  by  deducting  the  current 
inventory  of  raw  material  from  the  total  of  the  raw  material 
inventory  of  the  beginning  of  the  year  and  the  purchase  of  raw 
material,  or  in  some  cases  by  charging  out  each  article  con- 
sumed separately. 

2.  Labor,  Direct. 

Note — Direct  Labor  Account  should  show  total  expended  for 
direct  labor  during  the  period.  The  cost  accounts  usually  dis- 
tribute this  item  over  the  work  performed.  Care  must  be  taken 
that  the  labor  distributed  to  jobs  is  credited  to  some  other 
account  either  in  separate  cost  books,  or  in  the  same  books. 
(Labor  Applied,  Cr.,  is  suggested.) 

3.  Direct  Expenses. 

Note — Expenses  relating  to  special  jobs  are  charged  directly  to 
the  job  in  the  cost  amounts.  This  account  is  required  to  verify 
the  distribution  of  the  amounts.  The  Direct  Expenses  Applied 
must  equal  the  Direct  Expense  account  of  the  period. 

C.  Elements  of  Cost,  Indirect. 

1.  Where  the  cost  department  uses  but  one  rate  of  oncost. 

a.  Labor,  Indirect. 

b.  Depreciation. 

Note — Depreciation  is  but  an  arbitrary  charge  made  to  record 
the  value  of  the  plant  and  machinery  consumed  in  operations. 
Plant  and  machinery  accounts  are  analogous  to  a  deferred 
charge  to  operations,  but  are  fixed  assets  instead  of  current 
assets. 

Note — We  suggest  that,  where  the  charges  for  depreciation 
which  have  been  made  in  the  past  are  not  a  reasonable  charge 
for  the  use  of  the  property  and  the  values  at  which  it  has  been 
carried  on  the  books  are  incorrect,  an  appraisal  of  the  property 
be  made  and  the  amount  thereof  be  used  as  the  basis  of  com- 
putation for  the  charges  of  the  prior  years.  This  will  necessi- 
tate that  the  appraised  value  be  treated  as  the  residual  value, 
and  the  computations  be  made  in  the  reverse  of  the  usual  order, 
to  secure  the  proper  cost  and  the  proper  charges  for  depre- 
ciation. 

c.  Superintendence. 

d.  Rent. 

i.  Paid  to  outsiders. 

2.  Arbitrarily  charged.     (See  7  B  3.) 

e.  Light. 

f.  Heat. 

g.  Factory  Expense. 

2.  Where  the  cost  department  uses  more  than  one  rate  of 
oncost. 

a.  Nondepartmental. 

Note — Accounts  the  same  as  before  would  be  used,  but  would  be 
grouped  to  crrrespond  with  the  charge  for  oncost  that  was  sup- 
posed to  care  for  their  distribution  to  the  cost  accounts. 

b.  Departmental. 

Note — Tn  this  case  the  freneral  books  will  show  all  expenses 
according  to  departments  and  the  amount  charged  to  each  de- 
partment will  be  distributed  to  that  department  by  the  aid  of 
one  or  more  rates  of  oncost. 

21 


SYLLABUS  OF  BOOKKEEPING  8  D 

D.  Elements  of  Trading. 

1.  Cost  of  sales — Turnover. 
Note — Found  as  in  8  B  1. 

2.  Selling  Expense. 

a.  Salesmen's  Salary, 
i.  City. 

2.  Country. 

Note — To  correspond  with  an  often  used  apportionment  of 
Sales. 

b.  Salesmen's  Commission. 

Note — The  commission  due  each  salesman  is  usually  summarized 
on  a  report  of  sales  and  this  report  is  then  paid.  It  acts  as  a 
voucher  covering  the  payment. 

c.  Salesmen's  Travelling  Expenses, 
i.  Cash. 

2.  Mileage  Books. 

Note — Where  mileage  books  are  used,  it  is  customary  to  charge 
Travelling  Expense  amount  with  the  cash  rate  per  mile  and  to 
credit  "John  Jones  Mileage  Account".  A  saving  of  about  one- 
half  cent  per  mile  results  from  the  use  of  the  books,  and  when 
a  book  is  used  the  salesman's  mileage  book  account  will  show 
a  profit.  This  profit  should  be  closed  into  a  Profit  on  Mileage 
Books  account,  which  in  turn  is  closed  into  travelling  expense. 
A  separate  account  should  be  kept  for  each  book  used. 

d.  Bad  Accounts,  Estimated. 

Note — This  is  but  an  arbitrary  charge  made  at  the  end  of  each 
fiscal  period  to  record  the  anticipated  loss  on  bad  accounts. 

e.  Credit  Department  Expense. 

Note — If  the  credit  department  handles  credits  exclusively,  its 
expense  may  be  treated  as  an  element  of  trading,  but,  as  in 
general,  the  credit  department  also  has  other  duties,  it  is  treated 
as  an  element  of  administration. 

f.  Outfr eight. 

Note — This  account  should  contain  expenditures  for  freight  or 
express  made  on  special  orders,  or  for  delivering  goods. 

g.  Store  Expense. 

Note — This  item  should  be  kept  in  a  number  of  various  accounts, 
each  representing  an  element  of  expense.  Their  number  de- 
pending on  the  scope  of  the  business. 

E.  Elements  of  Administration. 

1.  Salaries,  Management. 

a.  In  general. 

b.  Partners. 

c.  Directors. 

2.  Salaries,  Office. 

3.  Depreciation,  Office  Furniture. 

4.  Printing  and  Stationery. 

5.  Postage. 

6.  Rent. 

7.  Unapportioned  Expense. 

Note — The  quantity  and  names  of  the  above  items  may  bf 
changed  to  meet  the  requirements  of  each  business. 

22 


SYLLABUS  OF  BOOKKEEPING  8  F 

F.  Extraordinary  Expenses  or  Losses. 

1.  Discount  on  Sales. 

a.  True  Cash  Account. 

b.  Fictitious  Cash  Account. 

Example — A  flour  mill  adds  5.26%  to  a  reasonable  selling  price 
to  get  its  actual  selling  price,  from  which  a  discount  of  5%  is 
granted  for  prompt  payment.  This  is  but  a  scheme  to  keep 
down  the  amount  of  Accounts  Receivable  by  influencing  collec- 
tions.    See  also  Accounting  Principles. 

2.  Interest  on  Borrowed  Money. 

a.  Paid  in  Current  Period. 

b.  ^Written  Off  from  Deferred  Assets. 
See  5  A  3. 

/.  Equal  annual  charge  method  of  amortization. 

Note — This  is  permitted  by  the  Interstate  Commerce  Com- 
mission. 
2.  Effective  Interest  Method. 

Note — This  is  the  true  interest  method 
*See  "Accounting  Principles — Bond  Interest  Amortization"  for 
a  complete  discussion  of  the  principles  of  amortization. 

3.  Fire  Losses. 

Note — A  Fire  Loss  Adjustment  account  should  be  opened  and 
the  book  value  of  all  destroyed  property  transferred  thereto. 
Expenses  incidental  to  the  fire  are  charged  to  the  account.     Re- 
coveries from  insurance  companies  are  credits.     The  balance  of 
the  acccrnt  is  charged  off  as  an  extraordinary  loss. 

a.  Covered  by  Insurance  Policies. 

Note — In  case  of  total  loss,  the  balance  of  the  policy  is  cancelled 

r.  Co-insurance  Clause:  (a)  8o% ;  (b)  go%. 

1W  Demonstration — Company  "A"  has  the  following  property: 

Plant  No.  1 $10,000.00 

No.  2 20,000.00 

No.  3 30,000.00 

all  insi  red  under  an  80%  co-insurance  clause  policy.  The  com- 
pany has  placed  only  $40,000.00  of  insurance.  Plant  No.  2  is 
destroyed  by  fire.  What  amount  can  be  recovered  from  the 
insurance  company,  and  hew  should  the  portion  of  the  loss 
borne  by  the  company,  if  any,  appear  in  the  accounts? 

2.  Divided  Policies. 

Defined — A     policy     which     apportions     the     risk     to     certain 

properties. 

&9#  'Demonstration — Suppose  the  policy  mentioned  under  8  F  3 

a  1  had  contained  the  clause 

"It  is  hereby  agreed  and  declared  that  in  the  event  of 
fire  this  insurance  shall  contribute  and  pay  in  the  proportion 
that  the  v?lue  in  e?ch  of  the  sections,  buildings  or  localities 
hereinbefore  described  shall  bear  to  the  value  in  all  of  such 
sections,  buildings  or  localities  at  the  time  of  such  fire." 

What  amount  would  have  been  recoverable? 

3.  Valued  Policies. 

Note — In  Washington,  in  case  of  total  loss,  the  full  amount  of 
a  fire  insurance  policy  covering  real  estate  must  be  paid  even 
though  it  might  have  been  possible  to  prove  that  the  property 
was  not  actually  worth  the  amount  of  the  policy. 

4.  Contribution  under  General  Average  in  Marine  Insurance. 
Example — Share  of  payment  made  to  cover  jettisoned  cargo. 


23 


SYLLABUS  OF  BOOKKEEPING  8F3aS 

5.  Particular  Average  Losses. 

Note — These  losses  are  losses  incidental  to  the  nature  of  the 

goods  and  are  usually  not  covered  by  insurance.    In  many  cases 

they  are  treated  as  an  element  of  cost. 

Example — A  shipment  of  cabbage  spoils  in  transit  on  account 

of  heat  in  the  vessel. 

Not  Covered  by  Insurance  Policies. 

Note — Large  companies  having  scattered  properties  carry  their 
own  insurance  except  possibly  on  their  most  important  prop- 
erties, such  as  their  factory,  or  their  largest  ships. 
A  periodical  charge  is  made  against  operating  to  represent 
insurance,  and  losses  as  they  occur  are  charged  against  the 
credit  accumulation  of  these  amounts.  Losses  in  excess  of  the 
accumulation  are  charged  off  as  extraordinary  losses. 


24 


iV~ 


tc  " 


'ICO     ;  "      ■ 


! 


! 


SYLLABUS  OF  BOOKKEEPING  8  Q 

QUESTIONS 

1.  If  the  sales  of  an  organization  are  divided  as  to  Engines,  Boilers,  and 
Miscellaneous  Machinery,  under  what  heads  would  you  list 

10    8x10  Horizontal  Eclipse  Engines 
4    Upright  Boilers 
3     100  H.  P.  500  V.  Motors 
400  lbs.  Brass  Filings? 

2.  Ascertain  the  gross  profit  of  a  company  under  the  following  conditions : 

Inventory  at  beginning  of  year $45,000.00 

Purchases  95,000.00 

Stock  at  branch  office,  at  branch  office  figures 

which  are  25%  more  than  cost 6,000.00 

Sales  110,000.00 

Stock  on  hand 30,000.00 

3.  Under  what  conditions  is  it  desirable  to  include  Infreight  with  the 
purchases,  and  when  is  it  preferable  to  keep  it  in  a  separate  account? 

4.  The  beginning  inventory  and  the  purchases  total  $109,000.00.  The 
infreight  is  $12,000.00.  What  amount  of  freight  may  be  treated  as 
being  a  portion  of  the  final  inventory  if  the  list  price  of  the  final  inven- 
tory, exclusive  of  freight,  is  $43,000.00? 

5.  A  manufactory  expends  $15,000.00  for  direct  labor  during  a  particular 
period.  This  labor  is  charged  to  various  job  accounts  as  the  work 
progresses.  What  advantage  is  derived  by  crediting  some  account 
other  than  Direct  Labor? 

6.  Explain  various  methods  of  ascertaining  the  cost  of  material  con- 
sumed. 

7.  Into  what  groups  or  divisions  should  labor  be  divided? 

8.  Distinguish  between  direct  and  other  expenses. 

9.  Give  examples  of  indirect  elements  of  cost. 

10.  What  difference  exists  in  the  method  of  keeping  accounts  where  but 
one  rate  of  oncost  is  used,  and  where  departmental  cost  or  more  than 
one  rate  is  used?    Why  is  this  difference  in  the  accounts  required? 

11.  Give  arguments  for  and  against  including  an  arbitrary  amount,  repre- 
senting interest  on  invested  capital,  as  an  element  of  cost. 

12.  Under  what  account  headings  should  selling  expense  be  divided? 

13.  What  is  wrong  with  the  method  usually  adopted,  of  charging  the  total 
cost  of  a  mileage  book  direct  to  some  selling  expense  account  instead 
of  working  it  out,  as  used,  by  the  aid  of  a  mileage  account? 

14.  Under  what  divisional  heads  should  administrative  expenses  be  shown? 

15.  Distinguish  between  true  and  fictitious  cash  discount. 

16.  Explain  how  a  discount  on  bonds  sold  may  be  spread  over  the  accounts 
of  a  number  of  years  to  equalize  the  interest  charges  of  the  various 
years  affected. 


25 


SYLLABUS  OF  BOOKKEEPING  8  Q 

17.    Following  is  a  balance  sheet  of  the  John  Doe  Manufacturing  Company 
as  at  the  date  of  a  fire  which  destroyed  the  premises : 

Dr.  Cr. 

Real  Estate  $   100,000.00 

Buildings  175,000.00 

Plant  and  Equipment 250,000.00 

Inventories  500,000.00 

Accounts  Receivable 350,000.00 

Cash  in  Banks  75,000.00 

Cash  on  Hand _ 5,000.00 

Interest  and  Insurance  Prepaid 7,500.00 

Capital  Stock  $   300,000.00 

Accounts  Payable 150,000.00 

Notes  Payable 650,000.00 

Taxes  and  Interest  accrued 15,000.00 

Surplus  347,500.00 


$1,462,500.00     $1,462,500.00 


They  collected  80%  on  the  buildings,  95%  on  the  plant  and  equipment, 
and  75%  on  the  inventories ;  and  expended  $5,000.00  in  clearing  the 
premises.  The  balance  of  the  assets  is  lost.  Required,  the  Fire  Loss 
Adjustment  Account  in  detail;  also  a  balance  sheet  after  the  account 
is  closed. 

18.  What  is  the  effect  of  a  co-insurance  clause  in  a  policy? 

19.  In  the  demonstration,  8  F  3  a  1,  suppose  plant  No.  3  had  been  de- 
stroyed, what  would  have  been  the  amount  of  loss  suffered  by  the 
company  ? 

20.  (a)  Company  "B"  operates  a  number  of  branches  upon  which  it  carries 
its  own  insurance.  How  should  they  operate  the  insurance  account  to 
properly  charge  each  branch  with  the  amount  they  would  have  to  pay 
as  insurance  premiums? 

(b)  Suppose  an  insurance  reserve  operated  by  Company  "B"  amounted 
to  $40,000.00,  and  a  loss  of  $30,000.00  was  suffered.  How  would  it  be 
handled  in  the  books? 

(c)  Suppose  the  loss  was  $50,000.00  What  would  be  done  with  the 
$10,000.00  not  covered  by  the  reserve? 

21.  Prepare  a  problem  the  solution  of  which  will  illustrate  some  point  or 
points  in  this  or  preceding  lessons. 


26 


..    I 


SYLLABUS  OF  BOOKKEEPING  9  A 

9.  SUBSIDIARY  ACCOUNTS: 
A.  In  General. 

1.  Defined :  A  Subsidiary  Account  is  one  which  is  auxil- 
iary to,  though  not  necessarily  dependent  upon,  nor  es- 
sential to,  some  other  account. 

2.  Creation. 

a.  By  opening  a  new  account. 

^^Demonstration — An  insurance  account  shows  a  balance  of 
$126.00,  debit,  at  the  end  of  a  certain  year.  It  is  ascertained 
that  $18.00  of  this  represents  insurance  paid  in  advance.  A 
Subsidiary  Account  is  created  by  the  journal  entry. 

Dr.     Insurance  paid"  in  advance $18.00 

Cr.     Insurance  $18.00 

b.  By  bringing  down  the  balance  in  the  major  account. 

Note — This  method  is  preferable  as  it  does  not  require  journal 
entries  or  a  new  account. 

WB  Demonstration — In  the  preceding  demonstration  $108.01) 
.  represented  the  charge  for  insurance  for  the  current  year.  This 
amount  may  be  transferred  to  Profit  and  Loss,  directly,  leaving 
a  balance  of  $18.00  in  the  Insurance  Account,  representing  pre- 
paid insurance.  This  balance,  for  the  purpose  of  closing  the 
books,  is  a  Subsidiary  Account. 

c.  By  opening  a  new  account. 

Note — The  subsidiary  account  in  this  case  is  opened  to  contain 
some  items  which,  although  they  relate  to  the  major  account,  it 
is  not  desired  to  record  therein  for  the  reason  that  the  major 
account  would  be  disturbed  thereby  and  the  original  information 
might  become  lost. 

Example — Reserve  for  Depreciation,  which  is  an  offset  to  the 
machinery  account.  Premium  on  Capital  Stock,  which  is  an 
adjunct  to  Capital  Stock  Account  or  to  Surplus. 


27 


SYLLABUS  OF  BOOKKEEPING  9  B 

B.  Offsets  to  Major  Accounts. 

1.  Insurance  Paid  in  Advance. 

2.  Expenses  Incurred  in  Advance  of  Sales. 

3.  Discounts  on  Bonds. 

4.  Suspense  Accounts. 

5.  Accrued  Expense. 

6.  Reserve  Accounts. 

a.  Reserve  jor  Depreciation  of  Machinery. 

Note — This  account  is  created  to  separate  the  provision  for 
depreciation  from  the  machinery  account  until  the  accurate 
amount  thereof  can  be  ascertained. 

WW"  Demonstration — Company  "M"  operates  two  properties 
valued  at  $100,000.00  and  $200,000.00  respectively;  Property 
No.  1  depreciated  at  10%  annually  and  Property  No.  2  at  15%. 
How  should  the  depreciation  be  recorded  in  the  books  so  that 
the  cost  of  the  property  will  not  be  disturbed? 

b.  Reserve  for  Bad  Debts. 

i.    Based  on  total  of  accounts  outstanding. 

Note — See  "Accounting  Principles — Reserve  for  Bad  Debts" 
for  defects  of  this  method. 

2.    Based  on  total  time  sales. 

Note — Preferable,  as  it  makes  a  charge  against  the  opera- 
tions of  the  period  in  which  the  sale  is  made. 

c.  Reserve  for  Cash  Discounts. 

Note — Not  a  proper  account.  (See  "Accounting  Principles — 
Reserve  for  Cash  Discounts.") 

d.  Reserve  for  Repairs. 

Note — Repairs  are  not  the  subject  of  a  reserve,  for  the  reason 
that  accidents  do  not  accumulate. 

e.  Reserve  for  Renewals. 

Note — Losses  through  wear  accumulate,  hence  renewals  may  be 
the  subject  of  a  reserve. 

Note — Reserves  for  Renewals  may  be  kept  separate  from  Re- 
serves for  Depreciation  if  desired.  This  assures  that  losses  of 
one  kind  will  not  be  covered  by  reserves  provided  for  losses  of 
the  other  kind. 

f.  Reserves  for  loss  on  Deteriorated  Stock. 
WWDemonstration — In  three  successive  fiscal  years  a  manu- 
facturing corporation  values  its  supplies,  etc.,  in  hand,  at  cost, 
with  deduction  for  deterioration  as  follows :  At  the  end  of  the 
first  year  5%  ;  at  the  end  of  the  second  year  10% ;  at  the  end 
of  the  third  year  15%.  With  the  inventory  taken  on  this  basis, 
the  profit  for  the  second  year  did  not  equal  the  dividends  de- 
clared and  surplus  was  intrenched  upon ;  in  the  third  year  the 
dividend  paid  was  so  much  in  excess  of  profits  that  the  surplus 
was  entirely  exhausted  and  a  debit  balance  created  in  the  profit 
and  loss  account. 

In  auditing  the  books,  how  would  you  treat  the  above  condi- 
tion in  your  report?     (111.) 

g.  Reserve  for  damages  to  Leased  Property. 

WW  Demonstration — A  firm  of  brickmakers,  under  the  terms  of 
their  twenty  years'  lease,  agree  that  at  the  close  of  the  term 
they  will  level  the  ground,  cover  it  with  soil,  and  generally 
restore  it  to  its  previous  conditions  for  agricultural  purposes. 

a.  How  would  you  deal  with  this  liability  in  the  accounts  of 
the  firm? 

b.  Assume  that  five  years  of  the  term  have  expired  and  none 
of  the  work  done  and  no  provisions  made,  flow  would  you 
adjust  matters?     (Penn.) 

28 


SYLLABUS  OF  BOOKKEEPING  9  C 


C.  Adjuncts. 

1.  Divisions  of  the  Cash  Account. 

a.  Bank. 

1.  Individual. 

2.  Divisional. 

Note — This  may  be 

a.    to  provide  accounts  in  different  cities,  or, 
a.    to    provide    special    funds    as    for    paying    dividends    or 
paying  purchases  and  expenses   from   separate  accounts 
where  there  are  a  number  of  departmental  cashiers. 

b.  Petty  Cash. 

c.  Imprest  Cash. 

Note — Difference  between  Petty  Cash  and  Imprest  Cash. 
JSIote — Imprest  System  allows  all  receipts  to  be  deposited  in  the 
bank  and  facilitates  internal  check,  preventing  lapping  system. 

2.  Adjuncts  to  other  accounts. 

a.  Premium  on  Bonds. 

Accumulated  interest  to  date  of  sale  of  bond  must  be  adjusted 
to  ascertain  the  true  amount  of  the  premium  or  discount. 

b.  Premium  on  Stock. 

Note — It    is    permanent    surplus    not    intended    for    dividends 

although  available  as  such. 

Note — Sale  of  stock  at  a  premium  does  not  produce  profit  for 

the  company. 

Note — Stock  is  issued  in  this  manner  to  equalize  the  value  of 

old  stock  and  the  selling  price  of  the  new,  or  in  case  of  new 

double   liability  organizations,   to   produce   additional   working 

capital  without  incurring  the  additional  liability. 

c.  Advertising  Appropriations. 

Note — Advertising  appropriations  unexpended  represent  charges 
made  against  a  particular  year  which  were  not  expenditures  of 
that  year  and  which  are  therefore  in  fact  additional  surplus. 
This  account  therefore  is  an  adjunct  to  surplus. 


29 


SYLLABUS  OF  BOOKKEEPING  9  Q 


QUESTIONS 

1.  What  is  the  object  of  subsidiary  accounts,  and  how  are  they  created? 
Give  pro  forma  entry  to  place  a  subsidiary  account  on  the  books ;  also 

.  explain  how  the  same  result  may  be  secured  without  the  aid  of  such 
an  entry. 

2.  Give  a  number  of  offsets ;  adjuncts. 

3.  A  $1,000.00  bond  dated  June  1st  is  sold  on  July  10th  for  $1,100.00. 
What  is  the  amount  of  the  premium? 

4.  Stock  of  the  Bjax  Company  is  sold  at  a  premium.  To  what  account 
should  the  premium  be  credited?  What  is  the  purpose  of  the  sale  of 
capital  stock  at  a  premium? 

5.  What  advantage  is  derived  by  separating  a  Reserve  for  Depreciation 
of  Machinery  Account  from  the  Machinery  Account? 

6.  How  would  you  proceed  to  ascertain  the  proper  credit  to  Reserve  for 
Bad  Debts  at  the  end  of  a  given  year? 

7.  Distinguish  between  repairs  and  renewals,  and  explain  why  one  of 
them  is  the  proper  subject  of  a  reserve  and  the  other  is  not. 

8.  What  advantage  is  derived  by  separating  the  Reserve  for  Renewals 
from  the  Reserve  for  Depreciation? 

9.  What  is  the  purpose  of  (a)  a  Reserve  for  Loss  on  Deteriorated  Stock; 
(b)  a  Reserve  for  Damages  to  Leased  Properties? 

10.  Prepare  a  problem  illustrating  some  point  or  points  covered  by  this 
or  preceding  lessons 

11.  Into  what  groups  may  a  cash  account  be  divided  and  subdivided  and 
what  is  the  purpose  of  each  subdivision. 

12.  Distinguish  between  petty  cash  and  imprest  cash. 

13.  The  following  among  other  accounts  appear  in  a  trial  balance  of  a 
manufacturing  concern.  How  would  you  group  them  to  show  net  and 
gross  results  of  each  major  item;  also  which  of  the  items  are  adjuncts 
or  offsets  to  accounts  which  do  not  appear  in  the  list? 

Plant  $100,000.00      Wages  due  and  unpaid....$       450.00 

Prepaid  Insurance  150.00      Advertising  appropriations 

Expenses  incurred  in  ad-  unused  7,800.00 

vance  of  sales 7,900.00      Bonds  Payable  100,000.00 

Discount  on  Bonds 10,000.00      Expenses  accrued  and 

Cash  8,000.00         unpaid  500.00 

Bank  14,800.00      Premium  on  Bonds 400.00 

Petty  Cash  400.00      Premium  on  Stock 9,000.00 

Accounts  Receivable  15,000.00      Reserve   for   renewals   of 

Raw  material  94,000.00  machinery   800.00 

Partly  manufactured  Reserve  for  Bad  Debts....         750.00 

goods  10,000.00      Reserve  for  Loss  on  De- 
Finished  goods  14,000.00  teriorated  Stock  850.00 

Reserve    for    damage    to 

leased  property  4,500.00 

Accounts  Payable  28,000.00 

Capital  100,000.00 

Surplus  11,200.00 


30 


SYLLABUS  OF  BOOKKEEPING  10  A 

10.  MIXED  ACCOUNTS: 

A.  Defined. 

(See  "Accounting  Principles — Mixed  Accounts.") 

B.  Merchandise. 

1.  Objection  thereto. 

(See  "Accounting  Principles — Merchandise  Accounts.") 

a.  Contains  two  or  more  classes  of  items. 

b.  Does  not  display  a  result. 

2.  Preferable  accounts. 

a.  Purchases 

b.  Sales. 

c.  Inventory. 

WG* Demonstration — By  analysis,  the  debit  side  of  merchandise 
account  shows  purchases,  $60,000;  returns  to  us,  $4,000;  entries 
offsetting  errors  in  sale  extensions,  $2,000;  trade  discounts  to 
customers,  $13,500;  balance,  profit,  $27,000;  the  credit  side 
shows  sales,  $90,000;  returns  by  us,  $5,000;  allowances  to  us, 
$1,500;  inventory  at  close  of  year,  $10,000.  Suggest  such 
changes  in  the  method  of  recording  the  foregoing  statement  as 
would  readily  show  (a)  the  net  amount  of  purchases;  (b)  the 
net  amount  of  sales;   (c)  the  percentage  of  profit. 

C.  Interest  and  Discount. 

1.  Objection  thereto. 

a.  Contains  numerous  classes  of  items. 

b.  Name  is  a  misnomer  as  applied  to  the  items  it  contains. 

2.  Substitutes  therefor. 

a.  Interest  and  Bank  Discount,  Dr. 

b.  Interest  on  Loans,  Dr. 

c.  Cash  Discount  on  Purchases,  Cr. 

d.  Cash  Discount  on  Sales. 

e.  Interest  on  Investment  of  Partners. 


31 


SYLLABUS  OF  BOOKKEEPING  10  D 

D.  Freight  and  Express. 

1.  Objections  thereto. 

a.  Contains  dissimilar  items. 

b.  Result  is  misstatement. 
3.  Substitutes  therefor. 

a.  Freight  on  Purchases,  In  Freight,  Dr. 

b.  Freight  on  Sales,  Out  Freight,  Cr. 

c.  Express  on  Sales,  Dr.  or  Cr. 

d.  Express  on  Purchases,  Dr. 

E.  Plant  Account. 

1.  Objections  thereto. 

a.  Too  broad  a  term. 

b.  Improperly  used. 

i.   May  contain  dissimilar  items. 

Example,  Machinery  and  Buildings. 

2.  Articles  contained  therein  may  be  subject  to  different  rates 
of  depreciation. 

3.  Often  used  to  cover  Watered  Stock. 

2.  Defects  may  be  overcome. 

a.  By  the  use  of  specific  accounts  for  component  parts 
thereof. 

Examples — Plant  Buildings,  Generators,  Transformers,  etc. 
Note — Each    account    should    contain    some    specific    class    of 
article,    all    subject   to    the    same    depreciation,    at    cost    price, 
including  the  expense  of  making  ready  for  operation. 

b.  By  the  use  of  an  equipment  ledger. 

Illustration — A  plant  ledger  usually  contains  a  complete  history 
of  each  individual  article,  with  its  size,  capacity,  expected  life, 
etc.     Columns  may  be  provided  as  follows : 

Debit  Side — Date,  Information,  Plant,  Renewals,  Deprecia- 

ation. 

Credit  Side — Date,  Information,  Plant,  Reserve  for  Renewals, 

Reserve  for  Depreciation. 


32 


SYLLABUS  OF  BOOKKEEPING  10  F 


F.  Goodwill. 

1.  Objections  thereto. 

a.  Often  improperly  used, 
i.    To  cover  watered  stock. 

Example— $100,000  worth  of  stock  is  issued  for  $25,000  worth 
of  property,  and  the  balance  is  thrown  into  goodwill. 
2.  To  place  an  arbitrary  value  on  the  books. 
BjP  Demonstration — A  merchant,  who  has  been  in  business  for 
twenty  years,  decides  to  put  a  valuation  on  the  goodwill  of  his 
business  and  carry  it  as  an  asset  on  his  ledger,  the  entry  being 
to  charge  Goodwill  and  credit  Surplus.  Another  merchant  five 
years  later  buys  the  entire  business,  including  the  goodwill,  and 
after  making  a  careful  inventory  finds  that  the  actual  net  re- 
sources exclusive  of  goodwill,  amount  to  $5,000  less  than  the 
sum  he  paid  for  it.  Discuss  the  subject  of  goodwill  in  respect 
to  the  above  case,  and  state  the  correct  manner  of  dealing 
therewith.     (111.) 

2.  Proper  contents  thereof. 

a.  Purchase  price  of  goodwill  paid  for  in  cash. 

i.    The  purchase  of  anticipated  excess  profits,  as  the  present 

worth  of  a  terminable  annuity  or  as  a  lump  sum  payment. 
Example — Goodwill  based  on  (1)  the  present  worth  of  excess 
profits  for  the  next  three  years,  or  (2)  based  on  a  year  and  a 
quarter  purchase  of  average  profits  in  excess  of  6%. 

a.  Upon  the  acquisition  of  a  new  or  additional  business. 

b.  Upon  the  withdrawal  of  a  partner  whose  interest  is  purchased. 
Note — In  this  case  only  the  portion  acquired  from  the  with 
drawing  partner  is  placed  on  the  books  of  the  new  partnership 
2.    The  capitalized  earnings  in  excess  of  a  reasonable  earning  on 

the  stock  of  the  company. 
Note — Where   irredeemable   stock   is   given    for   goodwill,   the 
amount  thereof  will  be  the  present  worth  of  an  interminable 
annuity  which  will  produce  the  amount  of  the  excess  earnings. 

3.  Substitutes  therefor  in  objectionable  cases. 
a.  Discount  on  Stock. 


33 


SYLLABUS  OF  BOOKKEEPING  10  G 


Treasury  Stock. 

1.  Objection  thereto. 

a.  Not  specifically  used. 

j.   Might  contain  Unissued  Stock. 
2.    Might  contain  Unsubscribed  Stock. 

2.  Proper  contents  thereof. 

a.  Reacquired  stock  which  has  been  issued  at  some  prior 
date  at  par  value. 

3.  Preferable  accounts. 

a.  Donated  Stock. 

b.  Forfeited  Stock. 

Note — In  Washington,  Forfeited  Stock  must  be  sold,  away 
from  the  offices  of  the  company,  to  the  person  who  will  take 
the  least  amount  thereof  and  pay  the  amounts  due  thereon. 
The  balance  of  the  stock  reverts  to  the  original  owner  so  that 
the  company  can  make  nothing  on  the  transaction. 

c.  Purchased  Stock. 

Note — The  purchase  of  stock  by  a  corporation,  in  many  states, 
is  considered  illegal,  except  where  it  is  necessary  to  do  so  to 
protect  the  company  from  loss,  for  the  reason  that  it  reduces 
the  capital  of  the  company  without  a  compliance  with  the  laws 
covering  the  reduction  of  the  capital  stock  of  a  corporation. 
i.  Should  be  entered  at  cost  as  it  is  but  an  investment. 
Demonstration — A  company  has  acquired  at  $90.00  per  share, 
100  shares  of  its  own  capital  stock  of  the  par  value  of  $100.00 
per  share.  Its  Balance  Sheet  shows  Treasury  Stock  $9,000.00. 
Is  this  correct?  If  so,  why.  If  not,  state  how  you  would 
adjust  the  books.     (N.  Y.) 


34 


SYLLABUS  OF  BOOKKEEPING  10  Q 


QUESTIONS 

1.  Why  are  mixed  accounts  used? 

2.  Mention  a  number  of  objections  to  the  following  account  headings 
stating  what   other  account   heading  would  be   preferable   and   why: 

a.  Merchandise ; 

b.  Repairs  and  Improvements ; 

c.  Interest  and  Discount ; 

d.  Freight  and  Express  ; 

e.  Plant; 

f.  Goodwill ; 

g.  Treasury  Stock. 

3.  A  merchandise  account  contains  the  following  items :  Into  what  sub- 
divisions should  they  be  grouped  to  properly  show  the  results  of 
operations  ? 

Inventory  beginning  of  period $  40,000.00 

Inventory  end  of  period 28,000.00 

Purchases  120,000.00 

Sales  165,000.00 

Freight  to  purchasers 4,000.00 

Freight  to  ourselves 12,000.00 

Freight  allowed   us  by   shippers  on   goods  bought   F.  O.  B. 

our  city  750.00 

Express  on  purchases  500.00 

Allowances  900.00 

Returned  goods  to  us 500.00 

Goods  returned  by  us 950.00 

Gross  profit 16,800.00 

a.  What  is  the  amount  of  the  net  purchases? 

b.  What  is  the  amount  of  the  net  sales? 

c.  What  is  the  cost  of  sales — the  turnover? 

4.  The  Interest  and  Discount  account  of  a  certain  firm  shows  the  follow- 
ing items.     How  should  they  have  been  shown  ? 

Bank  discount  paid  $   850.00 

Interest  paid  on  loan _ 1,600.00 

Interest  received  on  liberty  bonds 1,200.00 

Cash  discounts  on  purchases 1,600.00 

Cash  discounts  on  sales _ 1,205.00 

Interest  on  partners  investments 6,000.00 

Trade  discounts  on  purchases 5,000.00 

5.  Why  is  it  desirable  to  distinguish  between  In  freight  and  Out  freight? 

6.  a.    Why  is  the  term  "Plant"  usually  undesirable  for  use  in  a  ledger, 

and  under  what  conditions  is  its  use  permissable? 
b.    Mention  a  few  of  the  most  important  objections  to  its  use. 

7.  What  is  Watered  Stock? 

8.  As  an  illustration  of  the  information  usually  contained  in  a  plant 
ledger,  draw  a  form  for  the  use  of  a  manufacturing  plant. 

9.  a.    What   is  the   purpose   of  a   Goodwill   account   and   what   are   the 

objections  thereto? 
b.    Under  what  conditions  is  its  use  proper  and  advisable? 

10.  The  Jones  Manufacturing  Co.,  a  partnership,  acquired  the  Eureka 
Manufacturing  Co.,  paying  cash  $10,000.00  for  goods  which  had  an 
inventory  value  of  $9,000.00  and  which  were  subject  to  liabilities  of 
$2,000.00;  simultaneously  partner  "A"  withdrew  from  the  firm,  the 
remaining  partners  paying  him,  as  his  share,  one-third  of  a  year  and  a 
half's  purchase  of  the  profits  of  the  last  thjee  years  for  his  goodwill. 
The  profits  for  the  first  year  were  $12,000.00;  second  year,  $14,000.00; 
third  year,  $13,400.00.  What  is  the  proper  debit  balance  of  the  good- 
will account? 


35 


SYLLABUS  OF  BOOKKEEPING  10  Q 

11.  If,  in  question  10,  the  investment  in  the  business  has  averaged  $12,000.00 
and  the  Eureka  Company  had  earned  an  average  of  $5,000  per  year, 
which  reasonably  could  be  expected  to  continue  indefinitely,  to  the 
benefit  of  its  purchasers,  and  it  were  contemplated  that  a  corporation 
be  organized  which  would  give  stock  for  goodwill  of  an  amount  which 
will  produce  the  equivalent  of  the  earnings  thereof  at  5%  dividends, 
what  will  be  the  amount  of  the  stock  given  for  the  goodwill?  For 
the  purpose  of  this  problem  presume  that  the  goodwill  earns  all  profits 
in  excess  of  7%  on  the  investment. 

12.  Distinguish   between   unissued   and '  unsubscribed   stock. 

13.  What  may  be  properly  included  in  the  Treasury  Stock  account. 

14.  Why  is  it  not  well  to  confuse  Donated  Stock,  Forfeited  Stock  and 
Purchased  Stock? 


36 


/ 


SYLLABUS  OF  BOOKKEEPING  11  A 

11.  ANALYSIS  OF  SPECIFIC  ACCOUNTS: 
A.  Purchases. 


1.  Should  contain  goods  purchased  for  resale,  only,  with 
credits  for  returned  goods.  Balance  should  be  net  pur- 
chases. 

2.  Infreight  and  Duty. 

Note — These  accounts  often  are  kept  separately  for  the  purpose 
of  apportionment  over  turnover  and  inventory. 

3.  Subdivisions  thereof. 

See  8  A  2. 

B.  Sales. 

1.  This  account  should  include  all  sales  of  stock  purchased 
for  purpose  of  resale  with  debits  for  overcharges  and 
returns.    The  balance  will  be  net  sales. 

2.  Sales  of  fixtures  should  not  be  included. 

3.  Approval  Sales. 

^^Demonstration — A  phonograph  house  sends  out  many  rec- 
ords on  24  hours'  approval.  These  sales  are  kept  in  memoran- 
dum form  by  the  aid  of  an  Approval  Sales  Register.  Column 
headings  are  Number,  Name,  Address,  Amount,  Dr.,  Returns, 
Cr.,  Cash  Cr.,  Charges  Cr.,  Number  of  Charge  to  customer.  This 
is  the  basis  of  the  Charge  to  Accounts  Receivable. 

4.  Consignment  Sales. 

Note — Although  consignment  sales  may  be  included  with  the 
regular  sales,  it  is  preferable  to  keep  them  separate  until  the 
sale  actually  is  made.  In  either  case,  they  are  deducted  from 
the  Accounts  Receivable  and  removed  from  the  books  at  closing 
date  unless  they  have  been  recorded  in  memorandum  accounts 
only  as, 

"    Dr.     J.  Jones  Const,  a/c  $    100.00 

Cr.     Consignment  Sales  $    100.00 

C.  Inventory. 

1.  The  inventory  should  be  charged  with  the  cost  of  all 
stock  on  hand,  at  any  particular  balancing  period,  which 
had  been  purchased  with  a  view  of  reselling. 

2.  A  separate  account  should  be  opened  for  each  inventory. 

3.  Valuing  Stock. 

a.  Consigned  goods. 

b.  Freight  to  Branches. 

c.  Intercompany  profits.  . 
i.  Partly  finished  goods. 
2.  Finished  goods. 

d.  Without  an  inventory. 

Note — Sales  divided  by  100%  plus  the  per  cent  of  gross  profit 
on  turnover,  to  get  1%  of  the  cost  of  goods  sold.  Original  in- 
ventory, plus  purchases,  less  cost  of  sales  gives  new  inventory. 


37 


SYLLABUS  OF  BOOKKEEPING  11  C  e 

e.  Uncompleted  contracts. 

Note — Conservative  accounting  does  not  permit  the  taking  of  a 
profit  until  all  contingencies  have  been  provided  for. 

/.   Fluctuation  in  values. 

1.  Cost  should  rule  for  purpose  of  ascertaining  profit. 

2.  Market  may  rule  as  upon  the  sale  of  a  business. 

3.  Purchases  at  different  prices  may  be  valued  at  prices  ruling 
on  last  purchases  equaling  stock  on  hand. 

WW  Demonstration — There  are  1,000  articles  on  hand  and  the 
last  purchases  were  as  follows : 

Nov.   1st,    400  @  $10.00 

Dec.    1st,    400  @      9.00 

Dec.    20,    400  @      9.50 
The  stock  should  be  taken  as  of  200  @  $10,  400  @  $9.00,  400  @ 
$9.50:  total  1,000. 

4.  Averages  of  stock  cards  may  be  used.  See  Accounting  Prin- 
ciples. 

D.  Cash. 

1.  In  General. 

2.  Bank  Accounts. 

3.  Trust  Funds. 

Note — Should  be  kept  separate  to  reduce  liability  of  trustee. 

4.  Certificates  of  Deposits. 

Note — Should  be  kept  separate ;  Account  interest  bearing. 

5.  I.  O.  U's. 

(See  Accounting  Principles.) 

6.  Order  Method. 

a.  Defined: 

A  method  of  handling  cash  payments  by  giving  orders  on  the 
company's  treasurer,  payable  through  the  Collection  Department 
of  a  bank  instead  of  through  the  paying  teller. 

b.  Advantages. 

1.  Enables  a  concern  to  have  a  number  of  parties  disbursing 
funds  ivithout  increasing  the  risks  of  fraud,  as  only  one  per- 
son or  set  of  signatures  is  able  to  withdraw  funds  from  the 
company's  bank  account.  The  others  only  make  drafts  on  the 
Treasurer  xvho  issues  checks  to  the  bank  in  payment  of  those 
which  are  bona  fide. 

2.  Enables  a  company  of  small  means  to  carry  on  a  larger  busi- 
ness ivithout  "kiting"  checks. 

c.  Disadvantages. 

1.  Throws  the  possibility  of  loss  through  dishonest  employees 
onto  the  customers  of  the  concern. 


38 


SYLLABUS  OF  BOOKKEEPING  11  E 

E.  Investments. 

1.  In  General. 

a.  Separate  accounts  for  each  at  cost  price,  also  for  income 
produced.  Account  heading  should  indicate  nature  of 
investment,  maturity  dates,  income  dates,  interest  rates, 
etc. 

b.  Appreciation  should  be  ignored. 

c.  Downward  fluctuation  should  be  provided  for  if  per- 
manent. 

2.  Investments  in  Real  Estate. 

a.  Non-profit  bearing. 

Note — Carrying  charges  may  be  included  in  accounts. 

b.  Profit  bearing. 

c.  Acquired  by  Dykeing  or  Fills. 

Note — Cost  included  all  expense  of  reclaiming. 

3.  Investments  in  Stock. 

a.  To  secure  control  of  other  organisations. 

Note — Should  be  entered  at  book  value  to  facilitate  preparation 
of  Consolidated  Balance  Sheets. 
WW  Demonstration— 

SOURDOUGH   COMPANY— BALANCE   SHEET. 

Cheechako  Co.  stock,  900  Bonds   payable $100,000.00 

shares  at  cost $  99,000.00  Capital  stock  200,000.00 

Cash    101,000.00 

Inventory 

(Purchased  of  outsid- 
ers)         56,000.00 

(Purchased  of  Sub. 
Co.  at  10%  increase 
over  cost)    44,000.00 

$300,000.00  $300,000.00 

Note — Cheechako  stock  should  be  entered  at  book  value  as  de- 
termined by  the  books  of  the  Cheechako  company.  No  profit 
Should  be  taken  on  inter-company  transactions. 

b.  To  produce  revenue. 

i.  Is  a  current  asset  and  subject  to  all  rules  that  relate  thereto. 

c.  Stocks  of  companies  operating  wasting  asset. 

Note — Value  thereof  must  be  reduced  annually  to  cover  capital 
returned  as  dividends  although  individuals  or  corporations  not 
holding  it  for  purpose  of  control  often  do  not  do  this. 

4.  Investments  in  Bonds. 

a.  Purchase  price  is  rarely  par. 

b.  Accumulated  interest  is  often  purchased  with  the  bond 
and  must  not  be  included  in  the  bond  account. 

c.  Premium  or  Discount  must  be  amortized  to  give  true 
interest  returns. 

HF  Demonstration — Required  entries  covering  the  issuance  of 
the  following  bonds,  and  also  the  entries  covering  the  first  two 
annual  interest  payments : 

(a)  Three,  4%  first-mortgage  bonds  sold  at  90  and  redeemable 
at  par,  netting  the  investor  5%. 

(b)  Two,  6%,  second-mortgage  bonds,  sold  at  110,  redeemable 
at  par,  netting  the  investor  5%. 

(c)  Five,  5%,  third-mortgage  bonds,  sold  at  par,  redeemable  at 
a  premium,  netting  the  investor  6%. 

(d)  Eight,  4%,  Collateral  trust  bonds,  sold  at  85,  redeemable  at 
a  premium,  netting  the  investor  7%. 

d.  Market  quotation  will  not  provide  properly  for  approach 
of  par  value  at  maturity. 

e.  Purchases  for  resale  are  treated  as  ordinary  current 
assets  ar.d  are  not  amortized. 

39 


SYLLABUS  OF  BOOKKEEPING  11  F 

F.  Organization  Expense.' 

1.  Includes  all  legal  or  other  expense  incidental  to  organ- 
ization. 

2.  May  include  all  interest  falling  to  period  of  construction. 

3.  Does  not  include  discount  on  stock. 

4.  Is  offset  by  earnings  during  period  of  incipiency. 

5.  Is  sometimes  apportioned  over  all  the  properties. 
Note — Erroneous  from  Federal  Tax  standpoint. 

6.  Often  is  spread  over  earning  of  first  few  years  as  a 
charge  to  surplus. 

7.  Is  a  capital  asset  and  need  not  be  depreciated. 

G.  Machinery. 

1.  Articles  prepared  for  use  of  firm. 

Note — They  should  not  be  carried  in  excess  of  cost.  Cost  usually 
is  not  presumed  to  include  a  portion  of  manager's  or  superintend- 
ent's salary  unless  an  extra  amount  is  paid  them,  as  this  has  a 
tendency  to  disturb  the  figures  covering  current  operation. 

2.  Moving  and  Altering. 

Note — In  general,  this  is  not  a  proper  charge  to  the  account  as 
the  value  or  life  of  the  property  is  seldom  increased.  The  cost 
thereof  should  be  charged  off  immediately,  although  it  may  be 
spread  over  a  few  years ;  however,  when  working  out  a  policy 
of  expansion  or  when  speeding  up  production,  moving  and  alter- 
ing may  represent  capital  expenditures. 

3.  Replacements. 

a.  Distinguish   betzueen  Repairs,   Renewals  and  Replace- 
ments. 

Note — Repairs  are  the  result  of  accidents.  Renewals  are  the 
result  of  wear.     Replacements  are  substitution   of  articles. 

b.  Result  of. 

Note — The  cost  of  one  article  with  its  provision  for  depreciation 
is  removed  and  the  cost  of  another  article  takes  its  place. 

c.  Extensive  Replacements. 

Note — Additional  profit  is  expected,  hence  loss  on  old  property 
may  be  spread  over  a  number  of  years,  or  if  desired,  may  be 
treated  as  part  of  the  cost  of  the  new  property. 
k^  demonstration — A  suburban  traction  company  after  equip- 
ping its  lines  at  a  very  considerable  expense  for  overhead  trolley 
and  operating  same  for  several  years,  decides  to  adopt  the  third 
rail  system.  Extensive  changes  are  necessary  in  changing  power 
houses,  rearranging  tracks,  and  altering  cars,  involving  an  ex- 
penditure of  $25,000.  In  addition,  considerable  machinery  and 
rolling  stock,  the  original  value  of  which  had  been  treated  as  a 
capital  outlay  and  was  carried  on  the  books  at  a  valuation  of 
$25,000  is  rendered  obsolete  and  is  disposed  of  for  $3,500,  showing 
a  loss  of  $21,500.  The  profits  from  operation  for  the  year  are 
.  $18,000. 

State  how  you  would  recommend  that  the  matter  be  dealt  with 
in  the  company's  accounts  and  whether  the  company  may  pay  a 
dividend.     (111.) 


40 


SYLLABUS  OF  BOOKKEEPING  11  Q 


QUESTIONS 

1.  What  may  be  properly  included  in  the  Purchase  Account? 

2.  Outline  a  desirable  method  of  recording  in-freight,  and  duty  so  that 
the  amount  relating  to  the  inventory  may  be  ascertained  readily. 

3.  Under  what  conditions  should  the  Purchase  Account  be  subdivided 
and   with   what  accounts   should   the   subdivisions  agree? 

4.  1  he  following  items  are  found  in  a  sales  account : 

Sales  of  merchandise  to  customers  for  cash $    4,800.00 

Sales  of  merchandise  to  customers  on  account 14,600.00 

Sales  of  machinery  on  account. 1,200.00 

Sales  cf  Corporation  Stock 500.00 

What  adjustments  should  be  made  before  closing  the  books? 

5.  Explain  how  Sales  On  Approval  may  be  handled. 

6.  A  balance  sheet  contains  the  following : 

J  Jones,  Capital  $  $    6,850.00 

Inventory,  Mdse 2,600.00 

Cash  1,875.00 

Accounts  Receivable,  Actual  Sales 3,000.00 

Accounts  Receivable,  Approval  Sales 1,064.00 

Accounts   Receivable,   Consignment 2,000.00 

Consignment  Sales  2,000.00 

Notes  Receivable  1,000.00 

Furniture  and  Fixtures  2,375.00 

Expense    Inventory   108.00 

Accounts  Payable  2,672.00 

Notes  Payable  2,500.00 

$  14,022.00    $  14,022.00 

What  adjustments  are  necessary  to  correct  the  Balance  Sheet,  and 
what  is  Jones'  net  worth  if  the  average  profit  on  his  goods  sold  or  sent 
out  on  approval  or  on  consignment  is  25%  of  the  selling  price  which 
is  used  when  billing,  and  if  the  inventory  contained  only  such  goods 
as  are  actually  in  stock? 

7.  The  Western  Hardware  Co.  regularly  ships  goods  to  the  Western 
Metal  Co.  on  consignment.  What  entry  should  be  "made  for  the  fol- 
lowing bill  of  goods  ? 

4— Concrete  Mixers  @  $480.00 $     1,920.00 

1—15  h.  p.  500  V.  D.  C.  Motor 250.00 

Shortly  afterwards  one  of  the  concrete  mixers  is  returned,  the  bal- 
ance are  sold  with  the  approval  of  the  Western  Hardware  Co.  at  an 
expense  of  $100.00  which  they  agree  to  stand.  What  entries  are 
required  to  cover  the  return  of  the  mixer;  the  sale  of  the  others,  and 
the  collection  of  the  amount  due? 

8.  Which  of  the  following  should  be  included  in  the  merchandise  inven- 
tory of  an  automobile  accessory  house? 

Tires,    wrenches,   mirrors,   typewriters,   tubes,   demountable    rims, 
coats,  gloves,  electric  wire,  oil,  grease,  stationery,  desks. 

9.  Why  is  it  necessary  to  act  with  care  when  determining  the  items  to  be 
included  in  an  inventory? 

10.  Under   what   conditions   would   you   separate   your   assets   into   more 
than  one  inventory? 

11.  John  Doe  finds  among  others,  the  following  items  in  his  inventory. 
How  should  thev  be  valued? 

Brushes  cost"  $18.00,    Freight  $1.00,    Duty  50c. 

Paint  received  on  consignment  at  a  guaranteed  price  to  the  owner 

of  $2.50  per  gallon ;  freight  paid  30c. 

Paint   similar  to   above   but   at    Branch   Office   with   freight   paid 

thereon  at  40c. 

Oil   at   branch   billed  to   them   at  85c ;   they  paid  freight   5c,  cost 

Executive  Office  65c  f.  o.  b.  their  store. 


41 


SYLLABUS  OF  BOOKKEEPING  11  Q 

12.  How  would  you  proceed  to  value  goods  lost  in  a  fire,  the  inventory 
on  January  1st,  purchases,  and  sales  being  known?  Book  records 
concerning  a  number  of  prior  years  are  available  also. 

13.  "A"  undertakes  to  construct  a  building  for  "B"  for  $12,000.00.  He 
estimates  the  total  cost  to  him  as  $10,000.  When  the  building  is 
three-fourths  done,  he  closes  his  books  for  the  calendar  year.  He 
acknowledges  expenditures  to  date,  not  in  his  original  estimates,  of 
$850.00;  also,  that  additional  expenditure  of  $500.00,  not  included  in 
the  estimate,  will  be  required  to  complete  the  work.  What  profit  may 
he  take  at  this  time? 

14.  You  are  called  upon  to  determine  the  profits  of  a  business,  also  the 
value,  for  the  purpose  of  paying  off  a  retiring  partner.  After  con- 
siderable difficulty  you  have  satisfied  all  parties  except  on  the  follow- 
ing. What  stand  are  you  going  to  take  and  what  will  be  the  effect 
on  the  profits,  also  on  the  sale  price? 

Pig  bristles,  cost,  $500.00,  cost  to  replace  $1,400.00.  Sale  price 
retail  $1,600.00,  and  have  offer  to  buy  entire  lot  at  $1,450.00. 
Automobile,  (delivery)  cost  $2,500.00,  offered  $1,250.00  in  .ex- 
change for  new  car.  No  value  to  continuing  partner  but  good  as 
any  for  the  retiring  partner  who  offers  $800.00  for  it;  book  valiK 
is  $1,600.00;  by  spending  $300.00  on  it,  it  might  sell  for  $1,300.00 
at  an  expense  of  10%  commission.  Neither  partner  is  willing  to 
advance  the  $300.00  necessary  to  repair  it. 

Forty  units  of  Commodity  M,  market  price  40c,  retail  sale  price 
80c,  recent  purchases:  Nov.  20,  20c  @  85c;  Dec.  1st,  30c  @ 65c. 

15.  The  stock  card  of  a  certain  article  shows  as  follows:  What  value 
should  be  used  for  inventory  purposes? 

Used 


Purchases 

Dec.    1 

20 

at  .80    $16.00 

Dec.   4 

15 

at  .60        9.00 

Dec.  10 

Dec.  15 

10 

at   .55        5.50 

Dec.  20 

Balance 

Average 

20— $16.00 

.80 

35—  25.00 

.71 

31—  22.16 

.71 

41—  27.66 

.67 

30—  20.29 

.67 

4  at  .71     $2.84 

11  at  .67      7.37 

16.  What  reasons  can  yon  advance  for  separating  the  cash  account?  Into 
what  subdivisions  is  it  practicable  to  subdivide  it,  and  how  do  your 
reasons  affect  each? 

17.  What  properly  may  be  included  under  the  heading,  Investments,  and 
how  should  items  be  valued  for  the  purposes  of  the  account  in  a 
balance  sheet,  also  what  information  should  be  shown  in  the  ledger 
account  to  facilitate  the  proper  handling  of  the  account? 

18.  Outline  the  principles  of  valuation  which  affect  each  of  the  following 
accounts  but  which  do  not  affect  the  others : 

a.  Real  Estate, 

b.  Corporation  Stocks, 

c.  Corporate  Bonds. 

19.  "A"  corporation  pays  $125.00  per  share  for  all  of  the  stock  of  a 
certain  corporation  which  had  a  book  value  of  $110.00  per  share  on 
the  first  of  the  year  and  which  has  earned  $5.00  per  share  since.  At 
what  amount  should  it  be  shown  on  the  books  of  "A"  corporation  to 
facilitate  the  preparation  of  consolidated  balance  sheets? 

20.  Is  stock,  held  by  one  corporation  in  another  corporation  which  it 
controls,  a  fixed  or  a  current  asset  ? 

21.  Why  is  it  often  necessary  to  reduce  the  book  value  of  stock  in  a 
company  which  operates  a  wasting  asset,  by  at  least  a  portion  of 
each  dividend  received? 

22.  A  company  purchases  $8,000  of  bonds  paying  $8,200.00  on  September 
1st.  Interest  payable  January  1st  and  July  1st.  What  amounts  should 
appear  in  the  various  accounts  required? 


42 


SYLLABUS  OF  BOOKKEEPING  11  Q 

23.  A  7%  bond  is  sold  at  $105.00,  netting  the  investor  6y2%.  Required: 
Journal  entries  to  record  the  accounts  affected  during  the  first  three 
years. 

24.  The  market  quotations  concerning  the  bonds  mentioned  in  question  23 
for  each  of  the  three  succeeding  years  are  104,  104^4  and  10434. 
How  much  do  these  quotations  differ  from  the  amortized  book  values? 

25.  Had  the  bonds  referred  to  in  question  22,  been  purchased  for  immedi- 
ate resale,  how  would  the  accounts  have  appeared  in  the  books? 

26.  Which  cf  the  following  properly  may  be  included  in  the  account 
Organization  Expense . 

a.  Incorporation  expense. 

b.  Interest  for  1  year  on  bonds,  paid  in  advance.  The  period  of 
construction  is  10  months. 

c.  Discount  and  Expenses  on  selling  preferred  stock. 

d.  Interest  on  money  earned  during  the  period  of  construction, 
the  money  not  being  required  immediately  in  the  business. 

e.    Rent  paid  in  advance  on  land  covering  a  two-year  period. 

27.  Mention  a  number  of  ways  of  disposing  of  the  Organization  Expense 
account. 

28.  Which  of  the  following  properly  may  be  included  in  the  Machinery 
account  ? 

a.  One-half  of  engineer's  salary  during  construction.  He  is  regu- 
larly employed  in  the  plant,  although  during  the  period  of  con- 
struction a  slight  bonus  was  granted  him. 

b.  A  particular  machine  is  found  to  be  poorly  placed  and  is 
moved ;  certain  changes  also  are  made  to  facilitate  operations. 
Extensive  changes  are  made  in  another  machine  to  increase  its 
output. 

d.  In  accommodating  the  plant  to  increased  efficiency  due  to  war 
work,  certain  machines,  satisfactory  for  normal  production, 
are  removed  and  sold.  The  cost  of  removing  is  $300.00,  and 
the  difference  between  book  value  and  scrap  value  is  $2,000.00. 
It  is  conceded  that  the  article  had  been  depreciated  sufficiently 
during  its  life  and  that  the  book  value  for  normal  purposes  was 
not  excessive. 

29.  A  machine  is  destroyed  by  fire  and  a  new  one  is  purchased ;  a  certain 
part  or  portion  of  the  new  one  wears  out  rapidly  and  a  new  portion 
is  acquired ;  also  an  accident  occurs  which  necessitates  the  purchase  of 
a  considerable  number  of  new  parts ;  furthermore,  while  preparing 
the  machinery  for  operations  after  the  accident  a  new  device  is  built 
into  it  which  makes  it  possible  to  do  an  additional  operation. 

Explain   wherein  there   is  a   repair,  a   renewal,   or  a   replacement 
in  each  of  the  above  mentioned  items. 

30.  A  machine  costing  $2,000.00  which  had  been  carried  on  the  books  for 
a  numbe  •  cf  years,  during  which  time  depreciation  thereon  had  been 
reserved  to  the  amount  of  $800.00,  was  replaced  by  a  new  machine  at 
a  net  cost  of  $1,800.00,  $1,000.00  having  been  allowed  on  the  old 
machine. 

What  entries? 

31.  Had  the  entire  plant  referred  to  in  question  30,  been  overhauled,  in 
order  to  accommodate  it  to  a  new  order  of  things  such  as  war  work, 
or  increasing  requirements  of  production,  how  would  you  have 
handled  the  loss  on  the  machine? 


43 


SYLLABUSOF  BOOKKEEPING  12  A 

12.  COLLECTIVE  ACCOUNTS: 

A.  Cash  Sales  Account. 

1.  Definition. 

a.  An  account  operated  in  a  ledger  to  contain  cash  sales, 
and  to  facilitate  the  distribution  of  such  sales  through 
the  regular  sales  book. 

2.  Purpose. 

a.  To  facilitate  the  distribution  of  sales  in  a  sales  book. 

b.  To  relieve  the  cash  book  of  extra  columns  which  would 
be  necessary  were  the  distribution  of  sales  made  therein. 

3.  Operations. 

a.  Account  "Cash  Sales"  is  opened  in  ledger.  Debits  are 
posted  from  Sales  Book.  Credits,  to  balance,  from  Cash 
Book. 

b.  The  account  usually  is  kept  in  the  Accounts  Receivable 
Ledger  but  may  be  kept  in  the  General  Ledger. 

Note — If  kept  in  Accounts  Receivable  ledger,  the  Accounts  Re- 
ceivable Controlling  account  must  be  debited  and  credited  with 
totals  from  Cash  and  Sales  books. 

1WD emonstration — Draw  a  form  of  Sales  book  with  the  fol- 
lowing headings :  Date,  Information,  Cash  Sales  Dr.,  Miscel- 
laneous Accounts  Dr.,  Folio,  Distribution  Columns  "A,"  "B," 
"C,"  "D,"  "E,"  also  a  cash  book  containing  Cash  Sales  Cr.,  and 
illustrate  operation  of  the  account. 

4.  Effect  on  Books. 

a.  Cash  Book  now  requires  only  one  column  instead  of 
numerous  columns. 

b.  An  extra  column  (Debit)  is  required  in  the  Sales  Book 
to  offset  the  distributed  credits  to  accounts  affected. 
Illustration — Sales  are  distributed  to  Mdse.,  Tires,  Bicycles 
and  Motorcycles.  The  Cash  book  will  require  but  one  column 
instead  of  four,  and  the  Sales  book,  one  extra  column  for  the 
debit. 

B.  Cash  Purchases. 

Note — Same  object,  method  and  effect  as  above,  except  that 
account  relates  to  purchases  instead  of  sales. 

C.  Controlling  Accounts. 
1.  In  General. 

a.  Object. 

i.  To  allow  numerous  accounts  of  a  class  to  be  represented  by 
one  account. 

a.  For  purposes  of  condensing  information. 

b.  To  facilitate  work. 

i.  To  reduce  the  number  of  accounts  in  a  particular  book, 
allowing  two  or  more  books  to  be  used. 

2.  To  allow  Accounts  Receivable  to  be  balanced  separately. 

3.  To  enable  additional  bookkeepers  to  work. 

b.  Method  of  Operation. 

1.  When  posting,  item  must  be  posted  to  the  controlling  account 
and  also  to  the  individual's  account,  cither  directly  or  in  totals. 

2.  When  balancing,  the  total  debits  to  the  subsidiary  ledger  must 
equal  total  debits  to  controlling  account ;  likewise  total  credits 
to  subsidiary  ledger  will  equal  total  credits  to  controlling 
account  and  the  balance  of  the  controlling  account  will  equal 
the  total  of  the  balances  of  the  accounts  in  the  subsidiary 
ledger. 

44 


SYLLABUS  OF  BOOKKEEPING  12  C  2 

2.  Accounts  Receivable  Account. 

a.  Object. 

i.  To  take  the  place  of  numerous  accounts  with  customers 
which  are  removed  to  another  binder  or  kept  in  a  separate 
book. 

b.  Indexing.    . 
i.  Loose  Leaf. 

a.  In  General. 

The  leaves  should  be  Hied  in  absolute  alphabetical  order 
in  preference  to  giving  them  a  serial  number  under  each 
index,  tab,  or  sheet. 

2.  Bound  Books. 

Index  with  ample  number  of  blank  spaces, 
a.  Graves  Index  provides  the  first  three  letters. 

3.  Miscellaneous. 

See  7  A  1  d  Districts. 
7  A  1  e  Salesmen. 

c.  Sundry  Debtors  Ledger. 

1.  With  index. 

2.  With  numbers  referring  to  alphabetical  file  of  invoices. 
Note — This  method  is  ideal  for  handling  "Will  Calls." 

d.  Statement  Ledger. 

Operation — Post  debits  to  statement  in  duplicate,  credits  to 
ledger,  then  before  sending  out  statements,  total  debits  on  state- 
ment and  enter  in  ledger,  simultaneously  entering  credits  and 
unpaid  balance  of  prior  months  on  statement  and  proving  its 
balance  by  comparing  statement  with  ledger. 

e.  Assigned  Accounts. 

Note — Entered  on  separate,  different  colored  sheets  in  the  same 
ledger.     Credits  entered  in  separate  columns  in  Cash   Book  to 
facilitate  payments  to  assignee. 
/.  Foreign. 

Operation — Additional  columns  are  kept,  enabling  transactions 

to  be  posted  in  both  currencies. 

Note — Used  only  where  sales  are  billed  in  foreign  currency. 

3.  Plant  Account. 

a.  Object:   To  keep  a  detailed  record  of  each  article  of  the 
plant,  to  facilitate  the  analysis  of  the  plant  account,  and 
to  make  a  study  of  the  individual  articles  possible. 
Note — Plant   account  is  not  always  a   controlling  account   for 
the  reason  that  items  therein  do  not  represent  specific  things. 

4.  Capital  Stock  Account. 

a.  Nature:    It  is  an  account  zvhich  shows  stock  authorised. 

b.  Object:  It  usually  controls  the  stock   ledger,   but  the 
figures  used  represent  shares  instead  of  dollars. 

5.  Investment  Accounts. 

a.  Use:  May  be  a  collective  controlling  account  where 
numerous  investments  are  carried  in  the  one  account, 
and  the  details  are  carried  in  a  separate  book. 
Illustration — Jones  and  Carr  have  numerous  investments,  each 
of  which  has  separate  accounts  in  the  ledger,  one  for  prin- 
cipal and  another  for  the  income.  In  order  to  place  these  ac- 
counts more  closely  under  the  control  of  an  officer,  they  are 
placed  in  a  separate  ledger. 
Note—See  HE. 


45 


SYLLABUS  OF  BOOKKEEPING  12  C  5  b 

Divisions  of. 

i.  Par  value  and  Discount  or  Premium  is  often  recorded  sepa- 
rately for  purposes  of  amortisation. 
Illustration — $1,015.00  is  paid  for  a  City  of  Seattle  4%  Improve- 
ment Bond.     The  entry  is  : 
City  of  Seattle    4%     Imp.  Bond. 


Prem.     Principal  Amortization  Principal 

15  1000 

Note— See  9  B  7. 
2.  Income  is  recorded  separately. 

Note — Often  controlled  by  separate  account  in  ledger. 
Example — Same  as  12  C  5  b  1,  but  3  columns  are  required. 

6.  Note  Receivable  Accounts 

a.  Individual  Notes, 
i.  Operation. 

A.  Debits  entered  in  Notes  Receivable  Register  in  order  of 
the  receipt  of  the  notes. 

Note — Total    of    Notes    Receivable    Register    is    basis    of 
entry. 

Dr.     Notes  Receivable. 

Cr.     Accounts  Receivable, 
enabling  one  listing  of  notes  to  suffice. 
See  17  B  1. 

B.  Credits  require  numerous  columns  so  total  payments  of 
month  will  not  be  confused  with  payments  of  prior  months 
where  trial  balance  is  proved  by  totaling  debits  and  credits 
for  the  month.    (Six  Column  Trial  Balance,  12  D  2  c  I  A.) 

b.  Installment  Notes, 
i.  Operation. 

A.  May  be  kept  same  as  individual  notes. 

B.  May  be  recorded  in  loose  leaf  or  card  ledgers  alphabet 
ically. 

Note. — Same  as  Accounts  Receivable. 

C.  Combined  Account  form  may  be  used. 

Illustration —    . 

JOHN  JONES. 
Notes      Acc't 
Rec.       Rec. 
Jan. 
1     Type  #4/148763.  $105.00 


Notes 

Acc't 

Rec. 

Rec. 

Tan. 

2     Cash  

$  10.00 

Note 

95.00 

Feb. 

2     Cash  

$25.00 

2.00 

2     Notes  2/2 $25.00 

3/2 25.00 

4/2 25.00 

5/2 20.00 

4     Repairs  2.00 

Note — Combined  form  is  preferable,  as  it  allows  interest  com- 
putation to  be  made  and  entered  in  the  Accounts  Receivable 
columns. 

c.  In  General. 

i.  Protest  fees  are  added  to  Notes  Receivable  Account. 

Note — This  is  contrary  to  most  authors  who  demand  that  the 

overdue  note  be  closed  into  the  Accounts  Receivable. 

7.  Subscription  Account. 

a.  Object. 

i.  To  reduce  number  of  accounts  in  ledger. 

b.  Operation. 

1.  Installment. 

Note — Ordinary  ledger  is  used,  or  combined  ledger  form  may 
be  used  combining  stock  ledger  and  subscription  ledger  in  one 
account  where  certificates  of  stock  are  given  only  as  payments 
are  made. 

2.  Call. 

Note — When  call  is  made  Subscription  account  is  credited  and 

Call    No is    debited ;    the    Call    account    now    becoming   a 

Collective  account. 

Note — The  Call  record  usually  takes  the  form  of  a  list  of  names 

with  amounts  to  be  paid  with  credits  thereon. 

46 


SYLLABUS  OF  BOOKKEEPING  12  C  8 

8.  Dividends  Payable. 

a.  Object. 

1.  To  record  persons  entitled  to  dividends  with  amounts  due 
each,  also  number  of  check  issued  in  payment. 

b.  Operation:    Same  as  Call  Account  (12  C  7  b  2). 

9.  Expense  Account. 

a.  Object. 

i.  Controlling  Expense  Account  permits  one  account  to  answer 
for  many  and  eliminates  extra  columns  from  books  of  original 
entry,  symbols  being  used  to  indicate  which  special  account  is 
to  be  used. 

b.  Operation, 
i.  Columnar. 

Ledger  Sheet  contains  column  for  each  subdivision  and  the 

total. 

Illustration — 

Manufacturing  Expense  Account. 

Date  and  Voucher  No.   A   B    C   D    E      Total 

2.  Auxiliary  Ledger. 

Note — Form  same  as  above  but  kept  in  a  separate  ledger. 

10.  Salary  Account. 

a.  Object. 

i.  To  keep  records  from  employees. 

b.  Operation. 

i.  Lock  ledger  is  used. 

2.  Cash  is  deposited  in  separate  bank  account. 

3.  Check  from  special  bank  account  is  issued  to  general  cash 
to  cover  advances  to  employees  of  cash  or  goods. 

11.  Accounts  Payable. 

a.  Individual. 

1.  Subdivisions. 

A.  City. 

B.  Country.  . 

C.  Foreign. 

Note — Requires  combined  form  of  ledger  and  separate  books 
of  original  entry  for  each  country  dealt  with. 

b.  Group  (Vouchers  Payable). 
1.  Object. 

A.  Allows  one  account  to  represent  many. 

B.  Permits  original  entry  to  be  used  as  final  entry  also. 

12.  Suspense  Accounts. 

a.  Object. 

1.  Removes  dead  items  from  active  accounts. 

b.  Component  Parts. 

1.  Accounts  Receivable. 

2.  Bills  Receivable. 

A.  Note  is  usually  attached  to  suspense  ledger  page. 

13.  General  Ledger. 

a.  Object. 

1.  Separates  operating  and  constantly  changing  accounts  from 
those  of  a  fixed  permanent  nature,  keeping  much  information 
t  private  in  a  Private  Ledger. 

Note—See  17  A  2  b. 

b.  Operation. 

1.  Requires  separate  columns  in  some  books  of  original  entry. 

2.  Private  entries  are  recorded  in  Private  Cash  book  and 
Journal. 

Note—See  17  A  2  b  3. 

3.  General  Ledger  is  closed  into  private  ledger  at  end  of  each 
fiscal  period.  It  is  opened  again  at  the  beginning  of  the  new 
period. 

47 


SYLLABUS  OF  BOOKKEEPING  12  D 


D.  Trial  Balance. 

1.  Object. 

a.  To  prove  accuracy  of  posting. 

Note — Does  not  detect  posting  to  wrong  account  of  offsetting 
error. 

2.  Method. 

a.  Footings. 

J.  Advantages. 

A.  Easy  to  draw  off. 

B.  Amount  may  be  ascertained  by  taking  totals  of  account  on 
last  trial  balance,  after  deducting  items  ruled  off,  plus 
totals  of  all  books  of  original  entry  to  find  total  new  trial 
balance  should  show.  Differences  represent  amount  of 
error. 

Note — No  account  may  be  ruled  out  except  immediately  after 
balancing. 

b.  Balances. 

i.  Advantages. 

A.  As  soon  as  balance  is  proved,  the  figures  may  be  used  for 
statistical  purposes. 

c.  Clwrges  and  Credits. 

1.  Operation. 

A.  Six  column  form  is  used  enabling  each  account  and  page 
to  be  proved  separately. 

Illustration — 
Page  1: 

Current 

Folio     Name                         Beginning  Entries               Ending         Proof 

Dr.         Cr.  Dr.         Cr.         Dr.         Cr. 

40     Purchases  600  200            10          690 

50     Sales    800  40          740                       1500 

60  Plant  800  100                         900 

61  Expense  _..  300  47                         347 

64     Cash    400  550          247          703 

66     Proprietorship   2400  2400 

2000  937  3900       6837 

3200  997       2640  6837 

Pages  2-12: 

Sundry  Accounts  ...1200  740    680   1260 

3200         1677               3900   8777 
3200 1677   3900 8777 

B.  In  locating  errors,  check  direct  from  books  of  original 
entry  to  Trial  Balance,  saving  one  checking. 

2.  Advantages. 

A.  Proof  is  direct  to  items  affected  only. 

B.  Old  postings  or  balances  do  not  cause  any  trouble. 

C.  In  systems  of  internal  check,  it  shows  just  what  entries 
have  been  made  affecting  each  account  and  reports  may 
be  prepared  to  explain  them  in  detail. 

Note — Of  particular  use  in  conducting  branch  offices. 


48 


SYLLABUS  OF  BOOKKEEPING  12  Q 


QUESTIONS 

1.  What  is  a  collective  account? 

2.  A  certain  concern  separates  its  sales  into  10  different  groups.  What 
expedient  may  it  adopt  to  overcome  the  necessity  of  having  ten  col- 
umns in  the  cash  book?     Explain  fully,  covering  all  operations. 

3.  Explain  fully  the  operation  of  controlling  accounts  including  the 
changes  in  the  books  necessary  where  they  are  used  as  well  as  their 
advantages  and  disadvantages. 

4.  What  disadvantages  accrue  where  more  than  one  account  is  placed  on 
each  page  in  an  accounts  receivable  ledger  ? 

5.  What  advantages  or  disadvantages  have  loose  leaf  books  in  com- 
parison with  bound  books? 

6.  Under  what  conditions  is  the  use  of  a  Sundry  Debtors  Ledger  ad- 
visable, and  how  would  you  arrange  to  find  the  items  therein  when 
wanted  ? 

7.  Explain  the  operation  of  a  statement  ledger  and  give  a  practical 
example  of  its  use. 

8.  What  changes  or  manner  of  record  would  you  make  in  your  books 
of  account  to  record  the  assignment  of  a  number  of  accounts? 

9.  An  exporting  house  bills  its  goods  to  customers  in  South  American 
countries  in  their  own  currency  and  usually  receives  remittances  in 
their  currency.  Explain  how  the  ledgers  may  be  operated  to  facilitate 
rendering  statements  in  the  foreign  currency  and  also  to  make  it  pos 
sible  to  keep  the  accounts  as  part  of  the  regular  books  of  account? 

10.  Under  what  condition  may  a  plant  account  be  a  controlling  account, 
and  why  is  it  desirable  that  it  be  operated  as  such? 

11.  Explain  how  the  Capital  Stock  account  may  be  operated  as  a  con- 
trolling account. 

12.  What  suggestions  would  you  make  to  a  manufacturer  who  makes  a 
great  many  investments  outside  of  his  regular  business  and  who 
wishes  to  know  the  result  thereof  from  time  to  time? 

13.  What  reason  can  you  advance  for  showing  the  premium  or  discount 
on  a  bond  separately  in  the  accounts? 

14.  How  would  you  arrange  for  the  recording  of  the  income  on  each 
bond  in  an  investment  ledger? 

15.  Prepare  a  form  of  register  for  use  in  recording  a  great  number  of 
notes,  payments  on  which  are  usually  by  installments. 

16.  Under  what  conditions  is  it  advisable  to  keep  a  customers'  note  ac 
count  on  the  same  sheet  with  his  open  account? 

17.  Under  what  conditions  is  it  advisable  to  use  a  subscription  account? 

18.  A  corporation  sells  a  portion  of  its  stock,  accepting  notes ;  another 
portion  on  open  account  but  with  stated  periods  between  payments ; 
and  another  portion  subject  to  the  call  of  the  directors.  What  journal 
and  ledger  entries  should  be  made : 

a.  When  each  of  the  three  classes  of  accounts  are  opened? 

b.  When  an  installment  note  is  paid? 

c.  When  a  payment  is  made  on  open  account? 
d.  When  a  certificate  of  stock  is  issued? 

e.  When. a  call  is  made  for  20%  of  the  subscription? 

f.  When  the  call  is  paid? 

19.  Company  "X"  has  5000  stockholders.  Explain  fully  your  procedure 
in  recording  and  paying  a  dividend. 

20.  Company  "Z"  has  47  expense  accounts.  Explain  how  the  details  may 
be  handled  without  necessitating  individual  columns  for  each  in  the 
books  of  original  entry. 

21.  How  would  you  proceed  where  you  desired  to  keep  the  payroll  away 
from  most  of  the  employees,  and  when  payment  is  to  be  made  by 
check  ?  The  employees  buy  goods  from  the  company,  also  have  numer- 
out  advances  of  cash. 

22.  Company  "M"  buys  a  large  amount  of  goods  from  all  parts  of  the 
world.  A  considerable  portion  of  the  bills  are  paid  promptly,  others 
run  along  from  month  to  month.  How  may  they  care  for  these 
numerous  invoices? 

23.  Give  a  few  legitimate  examples  of  the  use  of  a  suspense  account. 

24.  Explain  how  a  general  ledger  may  become  a  subsidiary  ledger. 

25.  Illustrate  a  number  of  methods  of  taking  a  trial  balance  and  explain 
the  advantage  of  each. 

49 


SYLLABUS  OF  BOOKKEEPING  13  A 

13.  CAPITAL  AND  REVENUE: 

A.  Importance  of  Topic. 

1.  True  ascertainment  of  profits  is  necessary  for  safe  con- 
duct of  business. 

2.  Market  values  of  assets  is  secondary: 

B.  Definitions. 

1.  Capital  Receipts — Preferably  Capital  Income. 

Note — Capital  income  is  the  amount  contributed  to  or  guar- 
anteed for  the  permanent  use  of  an  organization  to  enable  it  to 
carry  on  its  business.  It  may  represent,  not  only  the  amount 
actually  invested  in  the  concern  in  cash,  but  also  amounts  which 
the  stockholders  have  agreed  to  contribute  in  the  future,  and 
also  amounts  secured  by  the  issuance  of  long  time  obligations. 

2.  Capital  Expenditures. 

Note — Capital  expenditures  are  expenditures  which  have  been 
made  in  acquiring  or  improving  the  equipment  or  other  prop- 
erty of  an  organization. 

3.  Working  Capital. 

Note — The  working  or  circulating  capital  of  an  organization  is 
the  amount  of  the  capital  income  which  remains  for  use  in 
operating  the  business  after  the  capital  expenditures  have  been 
cared  for. 

It  is  sometimes  defined  as  the  excess  of  current  assets  over 
current  liabilities.  Under  either  definition  the  amount  indicated 
would  be  the  same.  If  there  were  a  fund  of  $10,000  remaining 
from  the  capital  invested  after  the  fixed  assets  had  been  ac- 
quired, this  amount  would  be  represented  in  the  balance  sheet  as 
the  excess  of  current  assets  over  current  liabilities. 

4.  Fixed  or  Capital  Assets. 

Note — Fixed  assets  are  the  assets  of  a  concern  which  have 
been  acquired  for  its  permanent  use.  An  easy  method  of  de- 
termining whether  an  asset  is  fixed  or  current,  is  to  ascertain 
the  purpose  of  its  purchase.  If  it  was  acquired  for  the  purpose 
of  resale  or  represents  steps  in  the  conversion  of  such  assets 
into  cash,  it  is  a  current  asset.  All  other  assets  except  cash  are 
fixed. 

5.  Current  Assets. 

Floating  Assets. 

Note — Current  or  floating  assets  are  those  which  are  not  a 
pcrtion  of  the  permanent  investment  of  the  undertaking. 
They  are  the  assets  which  the  firm  deals  in  or  consumes  for  the 
purpose  of  making  a  profit,  or  which  represent  cash,  or  are 
in  a  form  readily  convertible  into  cash.  They  are  sometimes 
subdivided  into  quick  and  working  assets.  Cash,  readily  realiz- 
able investments,  accounts  or  notes  receivable  and  similar  items 
are  treated  as  quick  assets,  while  inventories  of  raw  material, 
finished  goods  and  other  items  which  are  to  be  sold  or  con- 
sumed are  considered  as  working  assets. 

6.  Fixed  Liabilities. 

Note. — Fixed  liabilities  represent  that  portion  of  the  capital 
income  of  an  organization  which  is  a  liability  of  the  concern, 
as  distinguished  from  the  investment  in  the  organization. 

7.  Current  Liabilities. 

Floating  Liabilities. 

Note — Current  or  floating  liabilities  are  those  which  require 
attention  within  a  short  time,  viz.,  liabilities  which  are  not  of  a 
permanent  character. 


50 


SYLLABUS  OF  BOOKKEEPING  13  B  8 

8.  Revenue  Receipts. — Preferably  Revenue  Income. 

Note — Revenue  income  is  the  income  which  properly  arises 
from  the  operation  of  an  undertaking. 

9.  Revenue  Expenditures. 

Note — Revenue  expenditures  are  those  incurred  in  the  opera- 
tion or  maintenance  of  an  undertaking. 

C.  Distinction. 

1.  Capital  expenditures  do  not  affect  profits  or  losses.  Rev- 
enue expenditures  relate  to  operation  or  maintenance. 

Note — Duration  is  the  keynote  of  distinction.  An  asset  con- 
sumed in  a  day  or  on  a  particular  job,  or  too  insignificant  in 
point  of  life  or  value  to  be  recorded  specifically  is  a  revenue 
item,  while  if  it  were  large,  costly  and  long  lived,  so  far  as  the 
business  is  concerned,  it  would  be  a  capital  item. 
Illustration — Machinery  bought  for  a  particular  job  is  revenue, 
although  in  general  it  is  capital. 

D.  Operation. 

1.  Capital. 

a.  Increase  of  Capital. 

i.  New  Properties. 

Note — Properties  include  cost  of  properties  including  expenses 
of  acquisition  as  well  as  carrying  charges  or  rebuilding.  Cost 
should  rule  even  though  value  may  be  different  from  ascertained 
cost.  Cost  however,  may  not  include  any  inter-company  profits. 
Illustration — Additions  are  made  to  old  properties.  The  value 
of  the  completed  property  is  less  than  the  book  value  of  the 
old  property  plus  the  additions,  but  cost  should  rule,  as  books 
are  supposed  to  show  depreciated  value  and  not  market  value. 
If  any  of  the  recorded  cost  of  additions  contains  any  amount 
of  profit  earned  by  some  other  company  of  a  group  of  affiliated 
companies,  it  should  be  removed  for  the  purposes  of  a  holding 
company's  financial  statement. 

2.  Organization  expenses. 
See  11  F. 

3.  Replacements. 

Note — Old  asset  is   removed   from  books    (Plant  account  and 

Reserve    for    Depreciation    account)    and    new   asset    takes    its 

place. 

1W  Demonstration — A  machine  costing  $2,000,  with  a  reserve 

for  depreciation  of  $1,200  is  sold  for  $800  and  replaced  by  a 

new  one  costing  $3,600.     Required  entries. 

See  11  G  3.  . 

b.  Decreases  of  Capital. 

1.  Depreciation. 

Illustration — Records  value  of  shingle  machine  consumed  and 
included  in  the  cost   of  shingles  made. 

2.  Sale. 

Note — Cost  usually  should  be  removed  from  books.  Difference 
between  cost  and  selling  price  should  be  recorded  separately 
after  adjusting  the  revenue  accounts  relating  to  the  article  sold. 

3.  Loss. 

Illustration — Fire,   Wreck,  etc. 

4.  Amortization. 

Defined — The  decline  in  value  owing  to  the  discontinuation  of 
the  special  work  for  which  a  machine  had  been  acquired. 
Analogous  to  depreciation  but  affected  by  changing  conditions 
instead  of  being  fairly  constant  in  operation.  Differs  from 
fluctuation,  as  fluctuation  is  the  result  of  a  change  of  other 
things  which  have  a  reflex  action  on  the  thing  in  question. 
Amortization  is  result  of  changed  condition  of  use  of  the  thing 
itself. 

51 


SYLLABUS  OF  BOOKKEEPING         13  D  1  c 

c.  Miscellaneous. 

i.  Fluctuations  of  Capital  Assets  are  ignored. 
Note — Capital  Assets  wete  acquired   for  permanent  use.     De- 
preciation accounts  record  consumption  of  original  asset  during 
active   life.     Giving   effect   to   fluctuations   will   disturb   annual 
charges. 

2.  Discounts,  Cash. 

Note — The  purchase  of  an  article  for  permanent  use  is  an- 
alogous to  the  purchase  of  a  new  business,  hence  cash  discounts 
are  analogous  to  organization  expenses  and  are  a  deduction 
from   capital. 

2.  Revenue. 

Note — Revenue  accounts  record  the  results  of  operations. 
Illustration — Sales,  Purchases,  Expenses,  etc. 

E.  Exceptions. 

1.  Organization  Expenditures. 

a.  Defined — All  expenditures  incidental  to  the  organisation 
of  a  company,  the  sale  of  its  stock  or  bonds,  in  fact  all 
expenditures  of  every  kind,  prior  to  successful  opera- 
tion, are  capital. 

Note — Miscellaneous  income  of  the  same  period  is  an  offset  on 
theory  that  an  organization  cannot  make  a  profit  or  suffer  losses 
prior  to  operations. 
See  11  F. 

2.  Wasting  Assets. 

a.  Defined — An  asset  operated  by  a  life  tenant  or  under 
a  condition  where  the  object  of  the  organisation  is  to 
discontinue  business  as  soon  as  the  asset  is  consumed, 
exhausted,  or  lost,  or  otherwise  disposed  of. 
Examples — Mines,  Quarries,  Single  buildings,  Single  ships,  Tim- 
ber lands,  etc. 

Note — Such  organizations  do  not  provide  for  the  reducing  value 
of  the  asset  from  year  to  year  for,  in  general,  it  is  not  intended 
to  replace  it ;  neither  is  it  possible  to  accurately  ascertain  the 
residual  value  and,  furthermore,  it  is  not  considered  desirable 
to  retain  in  the  business  large  sums  of  money  which  are  not 
to  be  reinvested. 

In  such  organizations,  the  investment  and  all  additional  ex- 
penditures made  in  developing,  promoting  or  financing  the  con- 
cern are  considered  as  capital  and  all  receipts  of  whatever  nature 
are  considered  as  revenue.  On  the  other  hand,  organizations 
operating  this  class  of  property,  which  intend  to  purchase  other 
properties  and  to  continue  operations  indefinitely,  should  pro- 
vide for  the  depreciation  and  exhaustion  of  their  properties  the 
same  as  any  other  concern,  otherwise  they  will  have  no  capital 
available  with  which  to  purchase  future  workings. 

3.  Sales  or  Purchases  on  Installment  Plan  at  a  Time  Price. 
Note — Selling  Price  or  Cost  of  such  articles  includes  an  ele- 
ment of  interest  which  must  be  apportioned  over  the  period 
of  credit. 


52 


SYLLABUS  OF  BOOKKEEPING  13  Q 


QUESTIONS 

1.  Of  what  importance  is  a  careful  distinction  between  Capital  and 
Revenue  ? 

2.  Define  Capital  Receipts ;  Capital  Expenditures ;  Working  Capital ; 
Capital  Assets ;  Current  Assets  ;  Fixed  Liabilities  ;  Current  Liabilities ; 
Revenue  Receipts ;  Revenue  Expenditures. 

3.  A  fountain  pen,  acquired  for  the  use  of  a  bookkeeper,  will  last  three 

or  four  years.     Why  is  it  not  a  fixed  asset? 

4.  Is  it  proper  to  capitalize  interest  paid  on  money  borrowed  to  provide 
for  construction? 

5.  (a)  What  is  the  amount  of  the  net  working  capital  in  the  following 
balance  sheet? 

Balance  Sheet  Jan.  1,  1915. 

Real    Estate $  10,000.00  Capital  Stock $  50,000.00 

Patents    8,000.00  Bonds     20,000.00 

Buildings     55,260.00  Notes    Payable 10,000.00 

Cash  9,320.00  Reserve  for  Bad  Debts 5,350.00 

Inventories  32,600.00  Accounts    Payable 32;502.00 

Interest    Prepaid 1,600.00  Reserve     for     Depreciation, 

Accounts     Receivable 40,200.00                Buildings     20,000.00 

Surplus    19,128.00 


$156,980.00  $156,980.00 


(b)   What  is  the  amount   of  the  net   working  capital   in  the  balance 

sheet  of  the  same  company  as  of  January  1,  1916,  which  here  follows : 
Balance  Sheet  Jan.  1,  1916. 

Peal    Estate $  17,000.00           Capital  Stock $  50,000.00 

Patents    7,000.00           Bonds     30,000.00 

Buildings     68,520.00           Notes    Payable 20,000.00 

Cash   3,260.00           Reserve  for  Bad   Debts 6,240.00 

Inventories  38,710.00           Accounts    Payable 25,620.00 

Interest    Prepaid 820.00  Reserve     for     Depreciation, 

Accounts     Receivable 42,200.00                Buildings    35,200.00 

Surplus    19,128.00 


$177,510.00  $177,510.00 


(c)   What  items  have  absorbed  the  difference? 

6.  State  which  of  the  following  should  be  charged  or  credited  to  Capital 
and  which  to  Revenue : 

(a)  Repairs  to  machinery  and  plant. 

(b)  Replacements  of  machinery  and  plant. 

(c)  Royalties  on  machines,  owned  and  used  by  the  company  owning 
the  patents,  similar  machines  being  leased  under  royalty  to  com- 
petitors. 

(d)  Brokerage  on  a  piece  of  property  purchased. 

(e)  Costs  attending  a  mortgage  given. 

(f)  Costs  of  patents,  including  lawyer's  charges  and  government  fee. 

(g)  Expenses  of  incorporating  a  company, 
(h)   Discount  on  bonds  sold. 

(i)    Premium  on  bonds  sold 

7.  A  corporation  distributing  gas  to  consumers  in  several  contiguous 
cities,  during  the  period  of  construction  of  pipe  lines,  charges  all 
materials  purchased  to  Construction  Account.  When  the  lines  are 
opened  and  operations  begun.,  rnrsed  materials  are  conservatively  in- 
ventoried at  depreciated  values  and  taken  into  Operating  Stock  ac- 
count. When  auditing  the  accounts  would  you  approve  or  disapprove 
this  treatment?     State  your  reasons. 

8.  Jones  and  Co.  buy  certain  special  machinery  for  use  in  the  construction 
of  a  bridge  which  will  require  three  years  to  complete.  Although, 
normally,  the  machinery  would  last  ten  years,  it  is  of  no  use  to  the 
contractors  and  will  be  scrapped  upon  the  completion  of  the  work. 
Does  it  represent  a  Revenue  or  a  Capital  expenditure? 

9.  A  trolley  road,  operating  in  New  York  State  under  the  jurisdiction 
of  the  Public  Service  Commission,  decided  to  improve  one  of  its  pas- 
senger stations.  The  book  value  of  the  property  at  this  time  was 
$68,000.  Improvements  erst  $15,000.  The  appraised  value  of  the  prop- 
erty, after  the  improvements  were  made,  was  $76,500.  How  would 
the  changes  involved  be  shown  on  the  books  of  the  trolley  company? 

53 


SYLLABUS  OF  BOOKKEEPING  13  Q 

10.  The  Uphill  Railroad  Company  hauls  much  of  its  own  construction  ma- 
terial and  in  doing  so  increases  the  initial  cost  of  the  material  by  add- 
ing a  freight  charge  for  its  own  services,  and  credits  the  amount  of 
the  freight  charge  to  earnings.  Is  such  action  proper?  If  not,  why 
not? 

11.  A  street  railway  company,  having  been  granted  a  franchise  for  a  new 
line,  expended  in  that  connection  the  following  amounts :  Legal  ex- 
penses incident  to  the  grant  $2,000;  expenses  of  cbtaining  consent  from 
abutting  property  owners  $10,000 ;  paving  the  street  between  the  tracks 
(which  was  a  condition  of  the  franchise)  $15,000;  damage  claims 
$500.  Prepare  journal  entries  to  record  the  above  items  on  the  general 
ledger. 

12.  What  kind  of  expenditures,  in  the  case  of  a  manufacturing  business, 
would  you  classify  as  maintenance,  repair  of  equipment,  machinery  and 
plant,  and  what  as  actual  betterments? 

13.  When  machinery  and  other  plant  purchases  are  subject  to  cash  dis- 
counts, how  should  the  items  be  entered  in  the  books?  Give  reasons 
for  your  answer. 

14.  In  auditing  the  accounts  of  a  business,  you  discover  that  part  of  the 
goods  have  been  sold  on  the  instalment  plan  and  that  these  sales  have 
been  treated  as  regular  sales.  What  action  would  you  take  in  such  a 
case? 

15.  In  auditing  the  accounts  of  a  company,  you  discover  that  an  appraisal 
shews  that  the  assets  in  the  aggregate  are  equal  to  the  book  value 
but  that  the  factory  site  has  appreciated  in  book  value  $100,000,  while 
the  machinery  has  depreciated  $100,000.  State  how  you  would  handle 
these  matters  in  preparing  the  accounts. 

16.  In  auditing  the  accounts  of  a  manufacturing  company,  you  find  that 
the  company  has  expended  a  total  of  $3,000  worth  of  its  own  material, 
labor  and  expense  in  constructing  a  machine  for  its  own  use.  This 
machine,  if  bought  in  the  open  market,  would  have  cost  $4,000.  An- 
other machine  was  constructed  under  similar  conditions  which  cost 
$12,000  but  which,  if  purchased  in  the  open  market,  could  have  been 
procured  for  $9,000.  At  what  amount  should  each  of  these  machines 
be  capitalized?     Why? 

17.  State  how  you,  as  auditor,  would  consider  and  report  to  your  client 
the  following  fact :  The  Beechnut  Chair  Company  purchased  several 
wood-working  plants  in  a  run-down  condition  and  made  thereon  ex- 
tensive outlays  for  repairs,  charging  all  such  expenditures  to  capital 
account.  Were  such  expenditures  properly  allocated  or  should  they 
have  been  charged  against  revenue?    State  your  reasons  fully. 

18.  In  the  machinery  account  of  a  company  under  audit,  you  find  the  fol- 
lowing, among  other  items : 

Dr.  Cr. 

Purchase  of  two  machines,  Type  Sales    of   old    machine.   Type   A 

A,    including   freight $8,000  (less  the  cost  of  removal   and 

Cost   of  removing  a  disused  ma-  freight)     $1,264 

chine,   Type   B,   to  make  room  Sale  of  old  machine,  Type  B 1,470 

for   new   machine 160 

Cost   of  installation  of  two.  new 

machines    280 

Alterations  to  four  Type  C  ma- 
chines, necessitated  by  change 
in    product 640 

Cost  of  moving  two  machines 
from  Building  A  to  Building 
B  to  permit  of  more  economi- 
cal operation,  including  rein- 
stallation           270 

The  balance  on  machinery  depreciation  account  shows  an  increase 
for  the  year  of  the  amount  provided  out  of  income  which  is  com- 
puted at  the  rate  of  4%  on  the  balance  of  machinery  account  at  the 
commencement  of  the  year.  The  method  of  keeping  the  machinery 
and  machinery  depreciation  accounts  has  been  in  force  from  the  com- 
mencement of  operations.  Draft  your  comments  as  auditor  of  these 
accounts,  assuming  that  no  items  other  than  those  above  mentioned 
call  for  any  comments.  (American  Institute.) 


54 


SYLLABUS  OF  BOOKKEEPING  13  Q 

19.  What  are  organization  expenses?  How  are  they  to  be  treated  in  ac- 
counts? At  what  point  do  expenses  cease  to  be  organization  expenses 
and  become  operating  expenses?  Is  the  deficiency  in  the  early  years 
of  a  corporation's  activities  (whether  an  actual  loss  or  a  deficiency 
between  the  earnings  and  the  normal  rate  of  return)  similar  to  organ- 
ization expenses?  How  should  such  deficiencies  be  treated  in  the 
accounts?  To  what  extent  is  such  a  deficiency  similar  to  interest  paid 
during  construction?  Should  such  deficiencies  be  carried  on  the  bal- 
ance sheet?  If  so,  should  they  be  written  off,  and  how  and  when? 
May  the  deficiencies  representing  the  difference  between  actual  earn- 
ings and  normal  rate  of  return  be  capitalized,  in  the  strict  sense  of 
having  capital  stock  issued  to  a  corresponding  sum?  State  clearly 
just  who  is  affected,  and  how,  by  the  different  methods  of  treating  the 
items  mentioned  above.     (American  Institute.) 

20.  If,  in  auditing  the  accounts  of  a  Power  Company,  you  found  included 
in  with  other  revenues,  an  amount  covering  a  charge  to  contractors 
for  estimated  loss  on  account  of  delay  in  completing  new  buildings  or 
installing  new  machinery,  would  you  consider  it  a  proper  entry  and 
what  would  be  your  duty  under  the  circumstances? 

21.  On  auditing  the  accounts  of  the  Milwaukee  Mercantile  Company,  you 
find  that  they  have  added  $375,000  to  the  investment  in  property,  made 
up  as  follows : 

Labor  $100,000.00 

Material   200,000.00 

Overhead,  being  proportion  of  factory  overhead  expense^ 50,000.00 

Interest  on  Investment  during  construction 25,000.00 

$375,000.00 
It  should  be  remarked  that  the  company  did  not  find  it  necessary 
to  borrow  money  to  build  this  plant,  and  the  interest  calculation  was 
made  upon  the  amounts  expended.  Had  the  company  contracted  for 
the  construction  of  this  building,  the  cost  would  have  been  $410,000, 
and  the  management  decided  to  credit  profit  and  loss  account  of  the 
year  with  $35,000,  being  the  excess  of  the  probable  contract  cost  over 
the  actual  cost  as  worked  out  above.  What  criticism  have  you  to  make 
of  these  transactions? 


55 


SYLLABUS  OF  BOOKKEEPING  14  A 

14.  ACCOUNTS  SHOWING  PROGRESS: 
A.  Trading. 

1.  Non-divisional. 

a.  Object:  Shows  all  items  affecting  gross  profit,  and  bal- 
ance carried  forward  to  Profit  and  Loss  account  is 
Gross  Profit. 

Note — This  form  seems  to  be  most  popular  in  Great  Britain;  in 
fact  the  divisional  form  or  the  Manufacturing  Account  seem  to 
be  of  but  recent  adoption  there. 

b.  Location:  Is  first  section  of  a  statement  showing  pro- 
gress. 

c.  Component  Parts:  All  items  affecting  cost  or  sales,  dif- 
ference being  gross  profit. 

Illustration — 

TRADING  ACCOUNT 

Inventory  1/1/17 $     4,000  Sales  $130,000 

Purchases   92,000 

$  96,000 
Inventory  12/31/17 6,000 

$  90,000 

Wages    10,000 

In-Freight  ~ 4,000 

Duty    2,000 

Gross     Profit     carried     to 

Profit  and  Loss  Account     24,000 


$130,000  $130,000 


56 


SYLLABUS  OF  BOOKKEEPING 


14  A  2 


2.  Divisional. 

a.  Object:  To  show — ist,  Gross  Profit,  and  2nd,  Profit  on 
Trading  of  a  concern  which  makes  an  analysis  of  its 
accounts  in  detail,  according  to  the  divisions  of  its  or- 
ganisation. 

Illustration — 

TRADING 

To  Cost  of  Goods  Sold:  Ry    Sales .00 

Inventory,  Finished  Less  Returns,  Allow- 
Goods,  beginning  of  ances  or  Trade  Dis- 
period   00  counts  00       .00 

Cost     of     Goods     m'f'd  

brought  down  00 

.00 
Less   Inventory,   end  of 

period   00       .00 

To  Gross  Profit,  carried 

for'd   .00 

.00  .00 

To  Selling  Expense:  By    Gross    Profit    bro't 

Salesmen's  Salaries 00  down  .00 

Commission  00 

Traveling    Expense 00 

Rent   of   Salesroom 00 

Cartage     or     Freight 
outwards    00       .00 

Reserve   for  Bad   Debts 

(based   on   sales) .00 

To    Profit    on    Trading 

carried   for'd .00 

.00  .00 


b.  Location:  When  this  form  is  used,  the  trading  account 
or  section,  heads  the  report  of  a  trading  concern,  but  it 
would  follow  the  manufacturing  account  of  a  manu- 
factory. 


Component  Parts: 
of  Selling. 


Sales  against  Cost  of  Sales  and  Cost 


57 


Brandy 

Wines 

Total 

;    400.00 

$6,000.00 

$7,100.00 

500.00 

5,000.00 

6,400.00 

1,000.00 

5,800.00 

8,300.00 

1,900.00 

9,500.00 

13,520.00 

200.00 

2,000.00 

2,500.00 

SYLLABUS  OF  BOOKKEEPING         14  A  2  d 

d.  Departmental. 

i.  Object — To  show  Gross  Profit  on  each  Department  and  Profit 
on  Trading  all  Departments. 

WW* Demonstration — From  the  following  particulars  of  the  busi- 
ness of  R.  Hay  &  Sons,  Wine  Merchants,  prepare  Departmental 
Accounts,  showing  the  gross  profit  on  whisky,  brandy,  and  gin 
and  wines,  and  Profit  and  Loss  Account  for  the  year. 

Gin  and 
Whiskey 

Stock  in  hand   1st  January $    700. 0V0 

Stock  in  hand  31st  December 900.00 

Purchases   1,500.00 

Sales    2,120.00 

Duty    and    charges 300.00 

The    following    additional    payments    and    allowances    have 
been  made  during  the  year : 

Cartage   $  50.00 

Wages   and    salaries 300.00 

Stationery    and   stamps 10.00 

Rent     50.00 

Taxes  18.00 

Cash  discount   allowed  to  customers 100.00 

Cash   discounts   received 150.00 

B.  Profit  and  Loss  Account. 

1.  Non-divisional. 

a.  Object:    To  show  items  which  reduce  the  Sales  to  Profit 
on  Ordinary  Business  or  to  Net  Profit. 

Illustration — 

PROFIT  AND  LOSS  ACCOUNT 

Inventory  $     4,000.00  Sales  $100,000.00 

Purchases   60,000.0u  Inventory    end    of 

Selling  expense  5,000.00  period   8,000.00 

Salaries    4,000.00 

Stationery    200.00 

Taxes    800.00 

Interest    400.00 

Net    Profit 33,600.00 


$108,000.00  $108,000.00 

2.  Divisional. 

a.  Purpose:  Shows  the  items  which  reduce  the  Profit  on 
Trading  to  Profit  on  Ordinary  Business.  In  this  case 
it  usually  follows  a  Trading  Account. 

(See  14  A  2  a). 

b.  Uses  of  Term. 

Note — The  term  Profit  and  Loss  Account  or  Statement  is  often 
used  broadly  to  designate  the  entire  statement  showing  the  prog- 
ress of  a  Manufacturing  or  Trading  concern  and  may  be  either 
non-divisional  as  14  B  1  or  may  be  divided  under  headings ; 
Manufacturing,  Trading,  Administration,  Net  Profits  and  Ap- 
propriation. 

Note — The  term  Profit  and  Loss  Account  also  is  used  to  indi- 
cate the  Administration  Section  where  there  is  also  either  a 
Manufacturing  Account  or  a  Trading  Account  or  both  in  the 
same  statement.  In  this  case,  the  items  of  the  Net  Profits  Sec- 
tion (14E)  usually  are  included  in  the  same  account,  either 
separated  from  the  other  items  or  intermingled  therewith. 

C.  Administration  Section  or  Account. 

1.  Purpose:  To  show  the  items  relating  to  the  adminis- 
tration of  the  business  or  of  such  a  general  nature  that 
they  cannot  be  shown  properly  in  any  other  section.  It 
usually  starts  at  the  point  Trading  Profit  and  ends  at 
the  point  Profit  on  Ordinary  Business. 

2.  Location :  Second  section  of  an  account  prepared  for 
Trading  Concern,  third  of  a  Manufactory. 

58 


SYLLABUS  OF  BOOKKEEPING  14  D 

D.  Manufacturing. 

1.  Object:  To  show  prime  cost  and  completed  cost  of 
goods  manufactured. 

2.  Location :  First  section  of  an  account  showing  pro- 
gress of  a  manufacturing  concern. 

3.  Component  Parts  : 

a.  First,  all  items  affecting  Prime  Cost. 
Example — Labor,  Material,  Duty,  Infreight. 

b.  Second,  all  items  of  Indirect  Cost. 
Examples — Indirect  labor,  rent,  light,  heat,  etc. 
See  8  C. 

E.  Net  Profits  Account. 

1.  Purpose :  To  show  causes  reducing  Profit  on  Ordinary 
Business  to  Net  Profit,  viz:  profit  or  losses  outside  the 
ordinary  run  of  business, — Capital  earnings  or  Capital 
losses. 

Illustration — See  7  B, 
8  F. 

2.  Location  :    Next  to  last  section. 

3.  Application :  This  account  may  be  used  for  either  divi- 
sional or  non-divisional  statements  showing  progress. 

F.  Appropriation  Account. 

1.  Purpose:  To  show  the  Surplus  account  in  detail  for 
period  under  review. 

2.  Location  :    Last  section. 

3.  Component  Parts:  Surplus  brought  from  last  period 
plus  additions  during  the  year  as  credits,  less  losses  af- 
fecting prior  years  and  appropriations  from  surplus. 

G.  Miscellaneous. 

Note — Preceding  sections  under  heading  14  are  for  trading  or 
manufacturing  concerns ;  clubs,  transportation  companies,  and 
in  fact  almost  every  kind  of  business  has  its  own  form  of  ac- 
counts to  show  its  progress.     The  same  general  rules  prevail. 

H.  Forms. 

1.  Account. 

Note — Items  shown  as  debits  and  credits. 

Illustration — 

MANUFACTURING 

To     Cost    of     Materials  By   Prime  Cost,  carried 

Used:  forward    .00 

Inventory,     raw     ma- 
terial     beginning      of 

period   00 

Purchases  00 

.00 
Less  Inv.  end  of  period     .00       .00 
To  Labor .00 

.00  .00 

To     Prime     Cost,     bro't  By    Inventory    partly 

down  .00  m'f'd    goods,    last    of 

Inventory,   partly   m'f'd  period .00 

goods,     beginning     of  By   cost   of  goods  m'f'd 

period   .00  carried   for'd .00 

Power,  Reserve  for  De- 
preciation on  ma- 
chinery,   etc .00 

.00  .00 

59 


SYLLABUS  OF  BOOKKEEPING 


14  H  1  a 


To  Cost  of  Goods  sold: 
Inventory,  Finished 
Goods,    beginning    of 

period   00 

Cost   of   Goods   m'f'd 
brought  down  00 

.00 
Less  Inventory  end  of 
period   00 

To  Gross  Profit,  carried 
for'd    


To  Selling  Expense: 

Salesmen's  Salaries 00 

Commission  00 

Traveling    Expense 00 

Rent   of   Salesroom 00 

Cartage     or     Freight 
outwards    00 

Reserve  for  Bad  Debts 
(based    on   sales) 

To  Profit  on  Trading, 
carried   for'd 


TRADING 

By   Sales   00 

Less  Returns,  Allow- 
ances or  Trade  Dis- 
counts      00 


.00 


By  Gross  Profit 
Bro't    down 


.00 
.00 


.00 
.00 


ADMINISTRATION 
To  Management  or  Of.  By    Trading    Profit, 

fice     Salaries .00  bro't  down 

General    Expense .00 

Office   Supplies .00 

To     Ordinary     Business 

Profit,   carried   for'd..  .00 


.00 


To    Expenses,    inciden- 
tal  to   securing  capital: 
Interest      on      Loans, 

etc 

Cash     Discount    on 

Sales  

To  Unusual  Losses: 
Defalcations,     Fire, 
etc 


.00 

NET  PROFIT 

By     Ordinary     Business 

Profit,  bro't  down 

Income     from     Invest- 

.00  ments    

Cash    Discount  on   Pur- 
.00  chases   


.00 
.00 
.00 

.00 


P.  &  L.  APPROPRIATION 


(Partnership) 
To   Interest   on   Capital     .00 
To    Appor  tionment 
among   Partners 00 


(Corporation) 

To  Special  Reserves 

To  Profit  and  Loss  Ad- 
justments relating  to 
prior    years 

To   Dividends  

To  Balance  (Undivided 
Profits)     


.00 


.00 
.00 


By    Balance    from    Pre- 
vious   Year .00 

By  Net  Profit,   Current 

.00  Year   .00 

=  By   Profit  from  Sale  of 

Fixed  Assets .00 

(If    apportionable    over 
prior   years) 


a.  Advantages. 

i.  Gives  more  opportunity  for  illustrating  and  comparing  items. 

2.  Allows  net  results  to  be  secured  more  readily. 

3.  Carries  the  thought  forward  more  steadily. 

b.  Disadvantages. 

1.   Useless  for  comparative  or  percentage  statements. 


60 


SYLLABUS  OF  BOOKKEEPING  14  H  2 

2.  Statement. 

Note — Items  follow  each  other  in  perpendicular  order. 
Illustration — (The  following  form  is  taken  from  Montgomery's 
Auditing.) 

A  B  COMPANY 

Comparative  Statement  of  EARNINGS  AND   EXPENSES  for  two  years 

ended  May  31,  1913 

YEARS  ENDED 
1913  1912 

May  31       Per  Cent      May  31       Per  Cent 

Gross    Sales    

Less  Allowances  and  Returns 


Net    Sales 


Inventory,  beginning  of  period 
Purchases,    net   

Less   Inventory  end  of  period.. 

Cost  of  Sales 

Gross    Profit    


Ratio   to   Sales 

Ratio  to   Cost 

Selling  Expenses: 

Salesmen's    Salaries    . 
Salesmen's    Expenses 

Commissions   

Advertising     .. 

Catalogues  

Delivery    Expenses    ... 


Total    Selling    Expenses.. 


Ratio   to    Sales 

Administration  and  General  Expenses: 

Executive    Salaries    

Office   Salaries   

Office    Expenses   

Stat'nery  and  Office  Supplies     

Telephone   and   Telegraph 

Postage    

Traveling    Expenses    

Legal   Expenses   

Rent    

Insurance    

Light,    Heat    and    Power 

Building    repairs    and    main- 
tenance   

Depreciation     on     Furniture 

and    Fixtures    

Miscellaneous    


Total    Administration    and 
General    Expenses   


Ratio    to    Sales... 
Total    Expenses 


Net    Earnings    

Deductions:   Interest  on  Loans, 
etc 

Net   Profit  


a.  Advantages. 

1.  Percentage  statements. 

Note — Percentage  figures  may  be  placed  close  to  figures  to  which 
they  relate. 

2.  Comparative  Statements. 

Noie — A  number  of  years'  figures  may  be  shown  side  by  side 
for  comparison. 


61 


SYLLABUS  OF  BOOKKEEPING  14  I 

I.  Deficiency  Account. 

1.  Object:    To  show  causes  leading  up  to  insolvency. 

2.  Form. 

See  15  A  2. 

J.  Account  Showing  Disposition  of  Profits. 

1.  Defined:  An  account  prepared  comparing  conditions 
of  different  times  for  the  purpose  of  showing  how  pro- 
fits have  been  absorbed  or  used.  A  similar  form  could 
be  used  to  show  the  absorption  of  borrowed  money  or 
invested  capital. 

2.  Advantages  :  Answers  the  big  question,  "Where  did  the 
money  go?" 

3.  Form. 

DISPOSITION  OF  PROFITS 
During  12  months  ending  Dec.  31,  1917 
ASSETS  1916  1917        Increase     Decrease 

•""  Cash    $     .00         $     .00         $  $     .00 

Acc'ts   Rec 00  .00  .00 

Inventories   00  .00  .00 

Prepaid  Insurance  00  .00  .00 

Plant   and   Equipment 00  .00  .00 

$     .00  $     .00         $     .00  $     .00 

Net  Increase  of  Assets $     .00 

LIABILITIES 

Accounts  Payable  $     .00  $     .00  $     .00  $ 

Accrued  Payroll  00  .00  .00 

Bills  Payable  00  .00  .00 

$     .00  $     .00         $     .00  $     .00 

Net  Increase  of  Liabilities $     .00 

NET  CHANGE  IN  PROPRIETORSHIP: 

Capital  and  Surplus  Dec.  31,  1917 $     .00 

Capital  and  Surplus  Dec.  31,  1916 00 

$     .00         $     .00 


62 


SYLLABUS  OF  BOOKKEEPING  14  Q 


QUESTIONS 

1.  What  different  forms  of  Trading  Statements  are  there  and  what  are 
their  distinguishing  features? 

2.  What  is  the  location  of  the  Trading  Section  of  a  statement  showing 
profits  and  losses? 

3.  Under  what  conditions  is  it  advisable  to  prepare  a  Departmental 
Trading  Account  and  how  should  such  an  account  be  arranged? 

4.  Under  what  conditions  would  it  be  advisable  to  use  the  Non-Divisional 
Profit  and  Loss  Account,  and  why  is  such  a  form  not  adapted  to  other 
purposes. 

5.  What  is  the  location  and  purpose,  and  what  are  the  component  parts 
and  various  designations  of  the  Administration  Section. 

6.  What  information  is  conveyed  by  the  Manufacturing  Account  and 
into  what  subdivision  may  it  be  shown  ? 

7.  Why  is  the  Net  Profits  Account  or  Section  often  necessary? 

8.  What  is  the  purpose  of  the  Appropriation  Section  and  where  should 
it  appear  in  a  financial  statement  ? 

9.  Distinguish  between  the  Account  Form  and  the  Statement  Form  of 
displaying  information,  explaining  the  advantages  and  disadvantages 
of  each. 

10.  Indicate,  on  the  following  list,  the  section  of  the  Profit  and  Loss 
account  in  which  each  revenue  item  would  appear,  using  the  following 
letters:  "A"  Manufacturing;  "B"  Trading;  "C"  Administration;  "D" 
Net  Profit ;  "E"  Appropriation ;  "X"  Items  which  properly  may  be 
grouped  separately. 

Accounts    Payable  36.  Manufacturing   Power,   Heat   and 

2.  Accounts  Receivable  Light 

3.  Accrued  Salaries  and  Wages  37.  Miscellaneous   Factory    Expenses 

4.  Advertising  38.  Miscellaneous  Selling  Expenses 

5.  Bad   Debts  Written   Off  39.  Non-productive  Labor 

6.  Bills  Payable  40.  Office  Equipment 

7.  Bills  Receivable  41.  Office  Salaries 

8.  Bond   Discount  42.  Officers'   Salaries  and   Expenses 

9.  Bond   Premium  43.  Organization   Expenses 
10.  Bond    Interest   Accrued  44.  Patent   Rights 

It.     Capital  Stock  45.     Patterns   and   Drawings 

12.  Cash  46.     Plant    Site 

13.  Credit    Department    Expenses  47.     Plant   Buildings 

14.  Depreciation     of     Buildings,     Ma-  48.  Plant    Machinery    and    Equipment 
chinery  and   Plant  49.  Productive  Labor 

15.  Depreciation    of    Workmen's    Cot-  50.  Purchasing  Department   Expenses 
tages  51.  Raw    Materials  Purchased 

16.  Directors'    Fees  52.  Rent  of  Workmen's  Cottages 

17.  Discount  on  Purchases  53.  Reserve    for    Depreciation    of 

18.  Discount  on   Sales  Bldgs.,   Machinery   and   Plant 

19.  Federal    Corporation   Tax  54.  Reserve    for    Depreciation    of 

20.  First   Mortgage   Bonds  Workmen's  Cottages 

21.  Freight    and    Cartage    Inward  55.  Reserve    for    Doubtful    Accounts 

22.  Freight  and   Cartage  Outward  56.  Reserve   for   Sinking  Fund 

23.  General   Office   Expenses  57.  Returns  and   Allowances  on  Pur- 

24.  Good  Will  chases 

25.  Insurance  58.  Returns  and  Allowances  on  Sales 

26.  Insurance    Premiums    Unexpired  59.  Sales   of   Manufactured   Goods 

27.  Interest  on  Bills  Payable  60.  Sales  of  Waste  Material 

28.  Interest  on   Bonds  61.  Sales    Agents'    Commissions 

29.  Income  from   Investments  62.  Salesmen's  Salaries 

30.  Inventory,   Raw   Materials  63.  Salesmen's  Expenses 

31.  Inventory,   Goods   in   Process  64.  Sinking  Fund   Investments 

32.  Inventory,    Manufactured   Goods  65.  Surplus 

33.  Investments    (Outside)  ..  66.  Taxes  on  Plant  and  Equipment 

34.  Maintenance    of    Buildings,     Ma-  67.  Taxes  Accrued 
chinery  and   Plant  68.  Workmen's  Cottages 

35.     Maintenance   of    Workmen's    Cot- 
tages 

11.  Refer  to  13  Q.  No.  5,  and  prepare  a  statement  showing  the  amount  of 
the  profits  and  their  disposition.  A  30%  Dividend  was  declared  during 
the  year. 


63 


SYLLABUS  OF  BOOKKEEPING  14  Q 

12.     The  following  is  the  income  account  of  the  Chicago  Manufacturing 
Company  for  the  year  ended  December  31,  1916: 

Gross  Sales $1,100,000 

Returns   100,000 


Net  Sales  1,000,000 

Cost  of  Sales  750,000 


Gross  Profit  250,000 

Selling  Expense  $100,000 

General  Expense  100,000       200,000 


Net  Profit  50,000 

Deductions  from  Income  25,000 


Net  Income  _...$     25,000 

In  submitting  your  report,  you  desire  to  present  a  statement  of  per- 
centages. What  figure  would  you  adopt  as  your  basis,  and  why 
would  you  take  it :  Gross  Sales,  Net  Sales,  Cost  of  Sales,  or  Gross 
Profit  ? 

13.  "B"  began  business  a  year  ago  keeping  only  single  entry  books.  He 
started  with  the  following  assets  and  liabilities  : 

Cash  $50,000.00  Mortgages    (Land) $10,000.00 

Land    20,000.00  Accounts    Payable 500.00 

Patents    10,000.00  Bills    Payable 2,000.00 

Notes     Receivable 10,000.00 

Bonds  5,000.00 

Accounts  Receivable 1,000.00 

Today  his  assets  and  liabilities  are  as  follows : 

Cash  $  5,000.00  Bonds    $10,000.00 

Land  and  Buildings 30,000.00  Accounts    Payable 2,000.00 

Patents    8,000.00  Accrued   Wages 500.00 

Trade    Marks 5,000.00  Note:   (B's  drawings  $1,000.00) 

Notes     Receivable 15,000.00 

Accounts  Receivable 20,000.00 

Material    and    Supplies 12,000.00 

Finished    Goods 10,000.00 

Prepare  a  tabulation  showing  what  the  profits  were  and  what  became 
of  them. 

14.  Prepare  a  tabular  statement,  using  such  figures  as  you  wish  for  a 
departmental  organization  operating  three  departments.  Accounts 
are  kept  with  Sales,  Purchases,  Inventories  and  departmental  expenses 
for  each  department.  The  departmental  expenses  are  classified  under 
the  headings :    Salaries  and  General  Departmental  Expense. 

Accounts  are  also  kept  with  General  Salaries,  Taxes,  Rent,  Light 
and  Heat,  Stationery,  Donations,  etc.,  which  do  not  specifically  affect 
any  particular  department. 

15.  Refer  to  question  10.  Prepare  Profit  and  Loss  Account  in  both 
Statement  Form  and  Account  Form  indicating  the  advantage  or  dis- 
advantage of  each. 


04 


SYLLABUS  OF  BOOKKEEPING  15  A 


15.  ACCOUNTS  SHOWING  EFFECT. 
A.  Statement  of  Affairs. 

1.  Definition:  An  account  prepared  to  show  the  value  ot 
the  claims  of  a  general  creditor  against  the  estate, 
of  an  insolvent,  or  firm  contemplating  bankruptcy. 

2.  Form. 

STATEMENT  OF  AFFAIRS 

M.  R.  BROWN,  DECEMBER  31,  1913 

Assets 

Nominal  Expected 

Amount  to  Produce 

$  3,000.00     Cash   $  3,000.00 

4,200.00     Notes    Receivable,    Good 4,200.00 

8,000.00     Accounts  Receivable: 

Good  $4,800.00     4,800.00 

Doubtful    2,000.00     1,200.00 

Bad    1,200.00 

10,200.00     Merchandise  7,500.00 

2,000.00     Fixtures  800.00 

$27,400.00  $21,500.00 

Less   Preferred   Creditors   as   per  contra 475.00 

Available   for    unsecured    creditors 21,025.00 

Deficiency    3,975.00 

$25,000.00 

Liabilities 
Nominal  Expected 

Amount  to  Rank 

$  Creditors:  $ 

20,000.00         Accts.   Payable  20,000.00 

5,000.00         Notes  Payable  5,000.00 

Preferred    Creditors    deducted    from    Assets    as    per 
contra: 

300.00     Taxes    $175.00 

175.00     Wages  300.00 

$475.00 


$25,475.00  $25,000.00 

DEFICIENCY  ACCOUNT 
To  Drawings $  1,800.00            By       Capital      at       Corn- 
To   Speculative   Losses....     2,000.00  mencement  $  7,500.00 

To  Sundry  Trade  Losses  By     Deficiency     as     per 

as    per    books 1,775.00  Statement  of  Affairs....     3,975.00 

To     Shrinkages     as     per 

statement   of  Affairs: 

Accts.    Rec $2,000.00 

Mdse 2,700.00 

Fixtures  1,200.00     5,900.00 


$11,475.00  $11,475.00 


3.  Rules  Affecting. 

a.  Partly  secured  creditors,  in  general,  may  participate  to 
the  amount  by  which  they  are  unsecured. 

b.  Over-secured  creditors  must  contribute  the  amount  by 
.     which  they  are  over-secured  to  the  general  fund. 

c.  Wages  to  the  amount  of  $300  earned  by  each  claimant 
within  three  months  prior  to  date  of  bankruptcy  are 
preferred  claims. 

d.  Taxes  are  preferred  claims. 

e.  Rent  is  not  a  preferred  claim  unless  it  accrued  after 
date  of  bankruptcy. 

f.  Preferential   claims    (not  preferred)    represent   prefer- 

ences granted  others  by  the  insolvent,  and  must  be  re- 
turned to  the  general  fund. 

65 


SYLLABUS  OF  BOOKKEEPING  IS  B 


B.  Statement  of  Assets  and  Liabilities. 

1.  Defined:  An  account,  prepared  from  any  source  other 
than  double  entry  books,  which  is  intended  to  show  the 
financial  condition  of  an  individual  or  organization. 

3.  Form. 

STATEMENT  OF  ASSETS  AND  LIABILITIES  OF  JOHN  DOE 
Assets  Liabilities 

Cash  : $  50.00  Notes   Payable $200.00 

Accounts    Receivable 100.00  Accounts   Payable 400.00 

Goods  300.00  Net   Worth 350.00 

Plant    500.00 


$950.00  $950.00 

C.  Balance  Sheet. 

1.  Definition :  An  account  prepared  from  double  entry 
books  to  show  the  financial  condition  of  an  organiza- 
tion as  at  a  given  moment. 

2.  Forms. 

a.  Statement. 

i.  Defined — Items   arranged   in   perpendicular   order   and    total 

liabilities  deducted  to  show  net  worth. 
Illustration — 
Assets  : 

Cash  $  50.00 

Accounts  Receivable  100.00 

Goods   300.00 

Plant   500.00 


Total  Assets $950.00 

Liabilities  : 

Notes  Payable  $200.00 

Accounts  Payable  400.00 


Total  Liabilities  $600.00 


Net  Worth  $350.00 

2.  Advantages. 

a.  Desirable  for  comparative  or  percentage  purposes. 

3.  Disadvantages. 

a.  Opportunity  for  comparison  of  component  parts  is  greatly 
reduced. 
Account. 

1.  In  General. 

A.  Characteristics — Has  Debit  and  Credit  columns,  although 
offsets  are  deducted  from  their  major  account  (See  0  B), 
and  the  debits  and  credits  are  viewed  separately  instead  of 
jointly  as  in  the  statement  form. 

B.  Advantages. 

1.  Allows  greater  opportunities  and  shows  results  or  items 
comparatively,  collectively,  or  as  offsets  to  each  other. 

C.  Disadvantages. 

1.  Unsatisfactory  where  a  number  of  balance  sheets  are 
being  compared. 

2.  English  Form. 

A.  Characteristics. 

1.  In  general  the  Capital  Stock  and  Properties  are  placed 
first  on  their  respective  sides,  followed  by  other  items 
in  a  certain  order. 


66 


SYLLABUS  OF  BOOKKEEPING    15  C  2  b  2  B 


B.  Advantages. 

j.  A  modified  form,  where  some  logic  is  applied  to  the 
arrangement  of  the  items,  is  desirable  where  the  purpose 
is  to  show  to  a  group  of  stockholders  how  their  money 
has  been  invested,  or  to  a  group  of  bondholders,  the 
amount  of  their  security.  The  author  has  never  been 
able  to  learn  of  any  desirable  feature  of  the  true  pre- 
scribed form. 

C.  Disadvantages. 

i.  Form  is  based  on  law  and  not  on  logic.    No  opportunity 
is  given  for  comparison,  and  items  of  like  kind  often 
are  not  combined.    A  very  unsatisfactory  form  and  rap- 
idly discarded  by  all  deep  thinking  accountants.     Jok- 
ingly, it  has  been  said  that  certain  accountants  use  it 
in  the  United  States,  only,  because  it  is  a  relic  of  their 
birthplace. 
Note — It  is  not  uncommon  to  include  the  English   form  with 
the  American  form  in  a  report  where  a  number  of  the  stock- 
holds  of  an  organization  live  in  Great  Britain. 

D.  Form. 

FORM  PRESCRIBED  BY  THE  ENGLISH  COMPANIES  ACT 
BALANCE  SHEET  OF  THE CO.,  Made  up  to 19.. 


Property  and  Assets 
Property  held  by  Company: 
Showing: 

Immovable  Property,  dis- 
tinguishing: 

(a)  Freehold   Land 

(b)  Freehold    Bldgs 

(c)  Leasehold    Bldgs 

Movable  Property,  dis- 
tinguishing: 

(d)  Stock-in-Trade    

(e)  Plant  

The  cost  to  be  stated 
with  deductions  for  de- 
terioration in  value  as 
charged  to  the  Reserve 
Fund  or  Profit  and 
Loss  

Debts    owing    to    the     Com- 
pany: 
Showing: 

Debts  considered  Good  for 
which  the  Company  holds 
Bills  or  other  Securities.. 
Debts  considered  Good  for 
which  the  Company  holds 

no  security 

Debts  considered  doubt- 
ful   and    bad 

Any  Debt  Due  from  a 
Director  or  Other  Officer 
of     the     Company     to     be 

separately    stated 

Cash   and   Investments: 
Showing: 

The  nature  of  Investment 

and  Rate  of  Interest 

The  Amount  of  Cash, 
where  Lodged,  and  if 
Bearing    Interest 


Capital  and  Liabilities 

Capital: 

Showing: 

The  Number  of  Shares 

The     Amount     Paid     per 

share  

If  any  Arrears  of  Calls, 
the  nature  of  the  Arrears 
and    the    Names    of    the 

Defaulters    

Particulars  of  any  For- 
feited  shares 

Debts  and  Liabilities  of  the 
Company: 

Showing: 

The  Amount  of  Loans 
on  Mortgages  or  Deben- 
ture  Bonds   

The  Amount  of  Debts 
owing  by  the  Company 
distinguishing: 

(a)  Debts  for  which 
Acceptances  have  been 
given  

(b)  Debts  to  Trades- 
men for  Supplies  of 
Stock-in-Trade  or  other 
articles   _ 

(c)  Debts  for  Law  Ex- 
penses   

(d)  Debts  for  Interest 
on  Debentures  or  Other 
Loans    

(e)  Unclaimed  D  i  v  i  - 
dends    

(f)  Debts  not  enume- 
rated  above 

Reserve  Fund: 

Showing:  The  Amount  set 
aside  from  Profits  to  meet 
Contingencies    

Profit  and  Loss: 

Showing:  The  Disposable 
Balance  for  Payment  of 
Dividends,     etc 


Contingent   Liabilities: 

Claims  Against  the  Com- 
pany   Not    Acknowledged 

as    Debts    

Moneys  for  which  the 
Company  is  Contingently 
Liable   


67 


SYLLABUS  OF  BOOKKEEPING   15  C  2  b  2  D 

American  Form. 
A.  Characteristics. 

i.  Assets  in  order  of  availability.  Fixed  Assets  are  all 
presumed  to  be  equally  unavailable  and  are  grouped  in 
the  order  of  their  magnitude. 

2.  Liabilities  in  order  of  their  claims  upon  the  assets. 

3.  Items  of  a  kind  are  grouped,  and  often  shown  in  one 
total. 

Illustration — 

Capital  $100,000 

Surplus  10,000 

Surplus  reserved  for  extension..      5,000 


Total  Proprietorship  $115,000 

4.  Total  current  assets  appear  opposite  total  current  lia- 
bilities;  total  fixed  assets  opposite  total  fixed  liabilities 
and  total  Passive  assets — Intangible  assets — opposite 
Proprietorship. 

B.  Advantages. 

Offers  greatest  possible  opportunity  for  study  and  analysis. 

C.  Form. 

BALANCE  SHEET  OF  THE  "X"  CO.,  AS  AT 191 ... 

CURRENT  ASSETS.  CURRENT   LIABILITIES. 

Cash   00  Bills  Payable  00 

Investments,    Bonds,  Accounts   Payable   .00 

etc .00  Sundry    Charges    Accrued: 

Bills    Receivable    00  Int.   on   Bills  Payable 00 

Accts.   Receivable  00  Int.    on    Bonds 00  .00 

.00 
Less  Reserve  for 

Bad    Debts  00  .00 

Inventories: 

M'f'd    Goods   00 

Goods  in   Process  of 

Manufacture 00 

Raw  Material  00  .00 

Investments,    Real    Es- 
tate, etc .00 

Deferred   Charges: 

Unexpired  Insurance  .00 
Rent     Paid     in     Ad- 
vance   00  .00 


Total    Current   Assets..  .00  Total  Current  Liabilities....  .00 

FIXED  ASSETS.  FIXED  LIABILITIES 

Real   Estate   .00  First   Mortgage  Bonds .00 

Buildings    00 

Machinery    00 

Furniture  and  Fixtures    .00 

.00  PROPRIETORSHIP 

Less  Res.   for  Dep 00  .00  .00 


Capital     00 


Goodwill   00  .00  Undivided    Profits 00  .00 


.00  .00 

Contingent    Liabilities.-  .00 


68 


SYLLABUS  OF  BOOKKEEPING  15  Q 


QUESTIONS 

Distinguish  between  a  Statement  of  Affairs  and  a  Statement  of  Assets 
and  Liabilities. 

Give  a  number  of  rules  concerning  the  distribution  of  a  bankrupt's 
estate. 

Distinguish    between    a    Statement    of    Assets    and    Liabilities    and    a 
Balance  Sheet. 

What   rules   should  be   followed  when  preparing  a   Balance    Sheet — 
American  Form? 

The  books  of  a  corporation  show  balances  at  the  debit  or  credit  of 
the  following  accounts :  Rents  from  tenements,  reserve  for  accounts 
receivable,  depreciation  on  machinery,  depreciation  on  furniture  and 
fixtures,  bond  redemption  account,  bills  receivable,  dividend  on  pre- 
ferred stock.  State  which  should  enter  the  profit  and  loss  account 
and  which  should  appear  in  the  balance  sheet.  Why? 
Classify  balance  sheets  as  to  form  and  describe  briefly  the  character- 
istics of  each  form. 

Refer  to  question  number   10,   chapter   14.     Group  the  items   into  a 
Profit  and  Loss  Account  and  Balance  Sheet. 

Construct  a  seven  column  statement  from  the  following  Trial  Balance 
and  Inventories. 

Dr.  Cr. 

Cash   $  12,300.00    $ 

Notes  Receivable  32,700.00 

Accounts  Receivable  47,000.00 

Furniture  and  Fixtures  3,000.00 

Building  13,000.00 

Real  Estate  50,000.00 

Notes  Payable  30,000.00 

Accounts  Payable  13,100.00 

Advertising    * 2,600.00 

Commission    3,050.00 

Supplies    12,900.00 

Salary  9,300.00 

Insurance  625.00 

Postage   1,650.00 

Discount   550.00 

Exchange    25.00 

Interest    175.00 

Discount    375.00 

Thos.  Greene,  Prop 85,000.00 

Drawing  Accounts    (Prop.) 4,300.00 

Mdse ! 64,350.00 

$193,000.00  $193,000.00 

INVENTORY. 

Furniture  and  Fixtures  $    2,500.00 

Buildings   12,500.00 

Real  Estate  47,000.00 

Advertising 300.00 

Supplies    500.00 

Salaries   300.00 

Insurance  150.00 

Postage    400.00 

Interest  (Asset)  25  00 

Mdse 5,365.00 

Note — Use  analysis  paper  with  column  headings :    Trial  Balance,  Dr. ; 

Trial  Balance,  Cr. ;  Inventories  ;  Losses  ;  Gains ;  Resources  ;  Liabilities! 


69 


SYLLABUS  OF  BOOKKEEPING  15  Q 

9.  You  are  instructed  to  prepare  a  statement  of  affairs  of  Chinook  and 
Multnomah  as  at  October  31,  1913.  Following  are  the  particulars : 
Merchandise,  $8,000;  Notes  Payable,  $2,500;  Loan  from  John  Oregon, 
$14,000;  Accounts  Receivable,  $1,800;  Accounts  Payable,  $5,000;  Bank 
Overdraft,  $2,000;  Furniture  and  Fixtures,  $1,000;  Real  Estate,  $4,500; 
Chinook  and  Multnomah  have  other  merchandise  to  the  value  of 
$5,000  in  addition  to  the  $8,000,  above  stated,  $2,200  of  which  is  held 
by  the  bank  as  security  for  the  overdraft,  and  $2,800  by  John  Oregon 
as  security  for  his  loan.  Oregon  also  holds  a  first  mortgage  on  the 
real  estate.  Of  the  accounts  receivable,  $500  are  considered  bad,  and 
$300  are  expected  to  realize  50%  of  their  face  value.  These  items 
must  be  dealt  with  properly  and  the  deficiency  shown. 
10.  From  the  following  trial  balance  of  Maker  and  Seller's  books,  ex- 
tracted on  December  31,  covering  six  months'  operations,  prepare  a 
manufacturing,  trading  and  profit  and  loss  account  and  balance  sheet : 

Dr.  Cr. 

Cash  at  Bank  $    3,000.00    $ 

Petty  Cash  in  Hand  15.00 

Bills  Receivable  on  Hand 1,000.00 

Sundry  Debtors  36,825.00 

Buildings   20,000.00 

Plant  and  Machinery  15,000.00 

Sundry  Creditors  9,850.00 

Loan  on  Mortgage  22,500.00 

Material    on    Hand,    July    1st 

(Raw  Material)   13,705.00 

Purchases   42,000.00 

Wages   7,020.00 

Discounts     Allowed     on     Pur- 
chases     1,950.00 

Discounts  Allowed  Customers     ..  4,690.00 

Returns     (Customers'     returns 

for  half-year)    1,650.00 

Sales   80,000.00 

Patent  Rights    (Expenses) 250.00 

Rent  and  Taxes 500.00 

Advertising   2,300.00 

Traveler's  Salary  2,150.00 

Carriage,  outward  1,950.00 

Bad  Debts  Written  Off 500.00 

Repairs   420.00 

Patent    Royalties    Received    in 
Advance  2,500.00 

Royalties  on  Patents  Attribut- 
ed to  Half-Year 200.00 

General  Expenses  2,510.00 

Interest  on  Loans  600.00 

Reserve  for  Bad  and  Doubtful 
Debts 2,700.00 

Reserve  for  Discounts  on  Book 
Debts   985.00 

Maker,  Capital  Account 30,000.00 

Maker,  Drawing  Account 6,000.00 

Seller,  Capital  Account 15,000.00 

Seller,  Drawing  Account 3,600.00 


$165,685.00    $165,685.00 

The  goods  on  hand   (raw  material)    on  December  31,  are  valued  at 

$17,500.00. 

Write  off  5  per  cent  from  plant  and  machinery  for  depreciation  for 

the  half-year.    The  profits  are  to  be  apportioned  as  follows : 

Maker,  two-thirds. 

Seller,  one-third. 


70 


SYLLABUS  OF  BOOKKEEPING  15  Q 

11.  Prepare  a  seven  column  statement  from  a  ledger  which  contained  the 
following  open  accounts  after  15  days  of  business : 

Dr.  Cr. 

Cash   $    8,418.76    $    2,363.86 

Peter  B.  Burns,  Partner 9,000.00 

Alfred  E.  Paine,  Partner 3,000.00 

Furniture  and  Fixtures  450.00 

Bills  Receivable  1,000.00 

Interest    .25 

Commission    27.25 

Mdse.  Discount  11.49  30.30 

Supplies   169.85 

James  Addington  151.56 

Mdse 7,060.00         3,040.50 

Accounts  Receivable 1,269.50  1,069.50 

Inventories :  Mdse.,  $4,474.07 ;  supplies,  $58.  Net  income  is  shared 
by  the  partners  in  proportion  to  their  investment.  Furniture  and  fix- 
tures remains  unchanged. 

12.  Criticise  the  following  Balance  Sheet  of  the  Cleveland  Building  Com- 
pany for  the  year  ended  December  31,  1915,  (a)  as  to  form  and 
arrangement;  (b)  as  to  values  for  Balance  Sheet  purposes;  (c)  as  to 
grouping  of  the  items : 

ASSETS. 
Fixed  Assets : 

Goodwill   $   500,000.00 

Patent  Rights,  etc.,  at  cost $  53,000.00 

Patent  Fees,  etc.,  paid  during  year 1,216.00  54,216.00 

Plant  and  Machinery,  at  cost 58,222.00 

612,438.00 

Investments  in  Branch— Detroit 102,000.00 

Deferred  Charges : 

Dividend  on   Preferred   Stock  paid  in   ad- 
vance           1,500.00 

Interest  and  Insurance  paid  in  advance 2,103.00  3,603.00 

Current  and  Working  Assets : 

Cost  of  unfinished  contracts,  including  ma- 
chinery in  use  52,125.00 

Add:    Estimated  Profit— 20%  10,425.00 


62,550.00 
Inventory  of  Materials  and  Supplies,  at  cost       12,307.00 
Notes  Receivable — Customers  and  for  Cap- 
ital Stock  512,000.00 

Accounts  Receivable  14,218.00 

Cash  in  Bank 5,260.00 

Cash  on  Hand  and  Advanced  to  Agents 14,817.00         621,152.00 

Total 1,339,193.00 

Deduct :  Surplus  58,618.00 

$1,280,575.00 

LIABILITIES. 
Capital  Stock : 
6%  Preferred  1,000  shares  of  $100.00  each  fully  paid 

(issued  at  90%)  $     90,000.00 

Common,  10,000  shares  of  $100.00  each 1,000,000.00 

$1,090,000.00 
Due  to  Branch— Toledo  190,575.00 

$1,280,575.00 


71 


SYLLABUS  OF  BOOKKEEPING  15  Q 

13.  Arrange  the  following  in  a  Balance  Sheet  for  presentation  to  a  banker, 
and  then  analyze  the  financial  standing  of  the  Thomas  Sales  Co.  from 
the  banker's  viewpoint. 

Furniture  and  Fixtures $  15,000.00    $ 

Stock  of  Merchandise  at  Cost 50,000.00 

Accounts  Receivable  35,000.00 

Officer's  Accounts  30,000.00 

Bonds  Owned  10,000.00 

Capital  Stock  75,000.00 

Accounts  Payable  20,000.00 

Trade  Notes   Payable  40,000.00 

Surplus 5,000.00 


$140,000.00    $140,000.00 


14.  Criticise  the  following  Balance  Sheet  from  both  the  auditor's  stand- 
point and  that  of  the  company's  financial  position.  Assume  that  the 
bond  indebtedness  outstanding  is  $200,000. 

ASSETS. 
Real    Estate,    Buildings,    Plants,    Machinery, 
Equipment,    and    other    permanent    Invest- 
ment, including  Goodwill  $1,000,000.00 

Investment    in    Stocks    and    Bonds    at    Cost 

•      (Market  value  $60,000) 100,000.00 

Current  Assets : 

Raw   Materials   $170,000.00 

Finished  Stock  at  Selling  Prices,  Less  5% 

Discount    100,000.00 

Consignments   (Selling  Value)   50,000.00 

Supplies   (Estimated)   200,000.00 

Accts.  and  Bills.  Rec.  including  advances  to 

Employes   125,000.00 

Stock  in  Treasury  (Unissued)  : 

Preferred    150,000.00 

Common    137,225.00 

Investments  in   Subsidiary  Companies 225,500.00 

Cash  and  Miscellaneous  Items  50,500.00      1,208,225.00 


$2,308,225.00 

LIABILITIES 

Capital  Stock : 

Preferred    $    500,000.00 

Common    750,000.00 

Bonds  and  Bankers'  Loans 575,000.00 

Current  Liabilities : 

Accounts  Payable  $  15,225.00 

Other   Indebtedness 231,000.00 

Accrued  Items - 2,000.00         248,225.00 

Reserves : 

For  Depreciation  $  50,000.00 

Less  Renewal  Expenditures,  written  off 65,000.00 

Balance  (Debit)  15,000.00 

For  Bad  Debts 20,000.00 

Other  Contingencies 5,000.00  10,000.00 

Surplus  (less  Dividends  Paid)  including  ap- 
preciation in  Real  Estate  and  other  Capital 
Assets  and  Profit  on  Inventorying  Raw  Ma- 
terials at  Market  Prices 225,000.00 


$2,308,225.00 


72 


SYLLABUS  OF  BOOKKEEPING  15  Q 

15.     John  Thompson  exhibits  the  following  Balance  Sheet  of  his  business, 
dated  June  30,  1900: 

Cash    $      750.00  Sundry    Creditors    $  6,000.00 

Book  Debts  9,500.00  Bills    Payable    7,500.00 

Stock   on    Hand 6,500.00  Bank   (Overdraft)    3,000.00 

Fixtures,   etc 1,750.00  Balance 2,000.00 

Total    $18,500.00  Total    $18,500.00 


On  questioning  Thompson,  it  was  found  that  he  had  omitted  the 
following  from  his  Balance  Sheet :  $250.00  owing  for  rent ;  $75.00 
owing  for  taxes ;  $2,500.00  borrowed  at  5%  from  his  wife  three  years 
ago,  no  payment  having  been  made  on  account  of  either  principal  or 
interest ;  a  draft  for  $500.00  accepted  by  a  firm  without  consideration, 
falling  due  in  30  days.  His  private  and  household  debts  amounted 
to  $600. 

The  item  entered  on  his  balance  sheet  as  cash  included  his  per- 
sonal I.  O.  U.!s  for  $600.00. 

Of  the  book  debts,  about  $3,500.00  might  be  considered  bad  and 
the  rest  good.  The  stock  was  good  except  $1,000.00  which  would  not 
produce  more  than  $100.  The  fixtures,  if  sold,  would  not  realize  more 
than  $250.  The  only  other  assets  were  household  furniture  worth 
about  $1,250.00  and  residence  valued  at  $7,500.00  subject  to  a  first 
mortgage  for  $5,000.00  at  4%,  and  also  a  second  mortgage  held  by 
his  bank  as  security  for  overdraft. 
Prepare  a  statement  of  affairs. 
16.  In  an  investigation  of  the  accounts  of  The  American  Products  Com- 
pany, you  find  that  the  Balance  Sheets  of  the  Company  for  the  past 
four  years  are  as  follows : 

ASSETS. 

Years   ending  December  31st 

.  1915 

Land   $  30,000 

Buildings   75,500 

Machinery   48,600 

Furniture   and    Fixtures   8,000 

Bonds   10,000 

Capital   Stock  in   Subsidiary  Co 25,000 

Advances   to    Subsidiary    Co 40,000 

Inventories    36,000 

Accounts    Receivable    189,000 

Cash    16,000 

Prepaid    Expenses   5,000 

$482,100     $528,300     $499,000     $609,500 

LIABILITIES 

Common    Stock    $  75,000     $  75,000     $  75,000     $  75,000 

Preferred  Stock  50,000 

Bonded    Debt   30,000 

Bills   Payable   75,000 

Accounts  Payable  162,500 

Accrued  Wages  10,000 

Accrued    Taxes    10,000 

Reserve  for   Depreciation   24,000 

Reserve  for   Contingencies  5,000 

Surplus    40,600 


1916 

1917 

1918 

30,000 

$  45,000 

$  45,000 

80,500 

80,500 

95,000 

53,800 

60,000 

83,500 

8,500 

8,500 

9,000 

10,000 

10,000 

5,000 

25,000 

58,000 

48,000 

66,000 

125,000 

96,000 

202,000 

229,500 

12,500 

20,000 

9,500 

6,000 

7,000 

8,000 

50,000 

60,000 

100,000 

20,000 

10,000 

85,000 

90,000 

100,000 

177,200 

87,400 

90,600 

16,500 

18,000 

25,000 

12,500 

40,000 

65,000 

32,000 

42,000 

63,000 

8,000 

10,000 

12,000 

52,100 

66,600 

78,900 

$482,100     $528,300     $499,000     $609,500 


The  net  profits  were  double  the  amount  of  dividends  paid  each 
year. 

Prepare  a  statement  reflecting  the  disposition  of  the  profits  earned 
and  other  funds  provided  each  year  and  the  change  in  working  capital 
since  December  31,  1915. 

17.  Rearrange  the  Balance  Sheet  shown  in  problem  12,  acting  arbitrarily 
wherever  by  so  doing  you  can  improve  the  form  or  arrangement. 

18.  Follow  the  same  procedure  as  outlined  in  question   17,  using  prob- 
lem 14.  / 


73 


SYLLABUS  OF  BOOKKEEPING  16  A 

16.  MISCELLANEOUS  BOOKS  OF  ACCOUNT. 
A.  Journals. 

1.  Object. 

a.  To  record,  in  convenient  order,  the  record  of  a  trans- 
action, usually  determining  Debits  and  Credits. 

2.  Evolution  of. 

a.  Money  Columns. 

i.  Simple  form:   Memorandum  book  without  columns. 

2.  Columnar  Form:    One  column  for  records  of  money  involved. 

3.  Double  Entry  Form:    Tzvo  money  columns — one  for  debits 
and  one  for  credits. 

b.  Explanation  Columns. 

i.  Simple  Form:    Simple  narrative. 

2.  Modern  Form: 

Date  between  transaction; 

Name  of  Debit  account  extending  to-  left  margin;  name  of 
Credit  account  1/4  inch  from  margin,  and  details  extending 
to  within  1/2  inch  of  left  margin. 

3.  Complex  Form: 

Numerous  columns;  each  intended  to  contain  certain  items  of 
a  class  as —  , 

Kegs;  1/2  Kegs;  Quarts;  Pints;' etc. 

c.  Manner  of  Entry. 
1.  Simple  Form: 

Each  transaction  entered  and  journalized  individually. 
Illustration — 

J.  Jones  $43.00 

Sales  $43.00 

Jones  bought  a  9x12  rug. 
?.  Joint  Entries:    Tzvo  or  more  debits  or  credits  or  both. 
Illustration — 

10th 

J.  Jones  $43.00 

P.  Smith  22.00 

Sales  $65.00 

To  record  sales  for  the  day. 

3.  Accumulated  Entries:    One  or  more  pages  devoted  to  entries 
of  a  class. 

Illustration — 

Sundries    $410.00 

Sales  $410.00 

J.  Jones $  43.00 

P.  Smith  22.00 

A.  Olson  48.00 

M.  Johnson  297.00 

$410.00 

4.  Books  of  Entry:    As  Sales  book,  Cash  book,  etc.,  set  aside 
for  entries  of  a  class. 

3.  Special  Forms. 

a.  Debits  and  Credits  tvidely  separated. 

1.  Order    of    Columns:      Debits;    Folio;    Explanation ;    Folio; 
Credits. 

Note — Date  is  inserted  in  explanation  column. 

2.  Advantage:   Money  columns  are  widely  separated,  thereby  re- 
ducing errors  in  posting. 


74 


SYLLABUS  OF  BOOKKEEPING  16  B 

B.  Sales  Records. 

1.  Purpose. 

a.  To  record  all  sales  in  a  convenient  manner. 

2.  Advantages. 

a.  Combines  all  items  of  a  class  and  removes  them  from 
General  Journal,  reduces  labor  in  posting  and  entering. 

3.  Forms. 

a.  Simple:  Explanation  column  containing  date,  name 
and  address  of  debtor  and  details  of  sales;  two  money 
columns,  one  for  value  of  each  item,  the  other  for  total 
invoice;  one  folio  column  preferably  placed  adjacent  to 
total  column,  although  often  placed  on  left  side,  folios 
being  inserted  just  before  the  name  of  creditor. 

b.  Departmental:  Same  as  16  B  3  a,  but  with  additional 
columns  on  right  wherein  sales  are  analysed  as  to  de- 
partment. 

Demonstration — On  June  10th,  A.  Jones,  430  10th  St.,  purchased 
4  Ideal  Heaters  @  $30.00;  5  kegs  of  6d  nails  @  $4.80;  and  4 
30x3 y2  non-skid  tires  @  $18.00.  Required  Sales  book  ar- 
ranged for  departments,  Auto  Supplies,  Building  Hardware, 
Stoves,  and  General  Hardware. 

c.  Salesmen's  Analysis:  Same  as  16  B  5  b,  but  with  addi- 
tional columns  on  right,  one  for  each  salesman. 

Note — Sales  are  analyzed,  1st,  as  to  department;  2nd,  as  to  sales- 
men, for  the  purpose  of  determining  commission  due  them. 

d.  Ledger  Analysis. 

1.  Form:  Any  of  preceding,  but  with  a  number  of  total  columns, 
one  for  each  sales  ledger  operated. 

Illustration — Items :     Sales,    Hardware ;    Sales,    accessories ; 
Sales,  Building  Material ;  A  to  L,  M  to  Z. 

2.  Purpose:  Analyses  sales  as  to  the  ledgers  affected  and  carries 
total  forward  for  the  purpose  of  controlling  accounts. 

e.  Sales  Abstract. 

1.  Form:  Same  as  16  B  3  b,  but  explanation  column  contains 
only  serial  number  of  sales. 

2.  Method:  Sales  slips  are  used  as  posting  medium  and  are 
registered  in  sales  abstract  for  the  purpose  of  analysis  and 
summarisation. 

3.  Advantage:  Saves  rewriting  sales  slips  and  provides  better 
evidence,  as  slips  are  often  shipping  records  as  zvell. 

C.  Purchase  Records. 

1.  Purpose. 

a.  To  record  all  purchases. 

2.  Advantages. 

a.  Removes  items  of  a  class  from  the  General  Journal  and 
combines  them. 

3.  Form. 

a.  Invoice  Book. 

Note — Invoices  pasted  in  book ;  amounts  extended  to  money 
columns  ruled  in  the  book ;  postings  made  from  this  money 
column. 

b.  Purchase  Journal. 

1.  Form:  Date  of  Entry;  Date  of  Invoice;  Name  of  Creditor; 
Terms;  Maturity;  Amount;  Analysis  as  to  departments. 

2.  Purpose:  Facilitates  analysis  of  purchases  and  their  summari- 
sation for  entry. 

75 


SYLLABUS  OF  BOOKKEEPING  16  D 


D.  Cash  Records. 

1.  Purposes. 

a.  To  record  all  transactions  affecting  cash. 

2.  Advantages. 

a.  Reduces  posting;  facilitates  entering;  enables  cash  to  be 
balanced  easily.  * 

3.  Forms. 

a.  Simple. 

Note — Two  columns — one  for  receipts,  the  other  for  payments. 

b.  Columnar. 

i.  Advantages:    Items  of  a  class  are  entered  in  individual  col- 
umns and  posted  as  one  item. 
2,  Form: 

A.  Simple: 

•Debit  Side:    Date,  Explanation,  Folio,  Accounts  Receiv- 
able, Miscellaneous,  Cash  Sales; 

Credit  Side:   Date,  Explanation,  Folio,  Miscellaneous,  Ex- 
pense, Freight,  Express. 

B.  Discount  Columns  as  Memorandum  only. 
i.  Form: 

Debit  Side:  Date,  Explanation,  Folio,  Discount  Al- 
lowed, Net  Cash  Received,  Miscellaneous,  Cash  Sales; 
Credit  Side:  Date,  Explanation,  Folio,  Discount  Re- 
ceived, Net  Cash  to  Accounts  Payable,  Miscellaneous, 
Expense,  Freight,  etc. 

2.  Disadvantages:  This  form  cannot  be  used  where  there 
is  more  than  one  sales  ledger  on  account  of  control  un- 
less additional  discount  columns  are  provided — one  for 
each  ledger. 

3.  Advantages :  Allows  net  cash  to  be  entered  in  Cash 
Book. 

C.  Discount  columns  as  regular  columns. 

1.  Form: 

Debit  side:   Date,  Explanation,  Folio,  Accounts  Receiv- 
able, Miscellaneous,  Cash  Sales,  Discount  Received; 
Credit  side:    Date,  Explanation,  Folio,  Miscellaneous, 
Expense,  etc.,  Discount  Allowed. 

— or — 
Debit    side:     Date,    Explanation,    Folio,    City    Ledger, 
Country  Ledger,  Foreign  Ledger,  Miscellaneous,  Cash 
Sales,  Discount  Received,  etc.; 

Credit  side:  Date,  Explanation,  Folio,  Accounts  Pay- 
able Ledger,  Miscellaneous,  Expense,  etc.,  Discount  Al- 
lowed. 

2.  Advantage:  Can  be  used  where  more  than  one  Sales 
ledger  is  operated. 

D.  Bank  Columns,  where  all  receipts  are  deposited  and  all 
payments  made  by  check. 

1.  Form: 

Debit  side:  Date,  Explanation,  Folio,  Discount  Allowed, 
Credit  to  Customers,  Miscellaneous  Credits,  Cash  Sales 
Credit,  Bank  Deposits; 

Credit  side:  Date,  Explanation,  Folio,  Discount  Re- 
ceived, Accounts  Payable  Ledger,  Miscellaneous,  Ex- 
pense, etc.,  Check  Number,  Withdrawals. 

2.  Advantage:  Each  page  balances  separately,  and  sepa- 
rate books  may  be  used  for  receipts  and  payments. 


76 


SYLLABUS  OF  BOOKKEEPING     16D3b2E 

E.  Bank  Columns  where  separate  accounts  are  operated  for 
Cash  and  Bank  in  ledger  and  where  bank  transactions  are 
entered  in  regular  Cash  Book, 
i.  Form: 

Debit  side:  Date,  Explanation,  Folio,  Credit  "A"  to  "L" 
Ledger,  Credit  "M"  to  "Z"  Ledger,  Credit  Miscellane- 
ous, Credit  Cash  Sales,  Credit  Discount  Received,  Credit 
Bank; 

Credit  side:  Date,  Explanation,  Folio,  Debit  Accounts 
Payable  Ledger,  Debit  Miscellaneous,  Debit  Discount 
Allowed,  Debit  Bank  Deposits,  Debit  Expense,  etc. 

2.  Advantage : 

a.  Combines  all  items  in  one  book  and  may  be  used 
where  it  is  desired  to  allow  payments  to  be  made  by 
either  cash  or  check. 

b.  Where  Daily  Balance  Book  is  used  prevents  fraud, 
for  errors  must  be  disclosed  as  they  cannot  be  thrown 
back  into  periods  prior  to  the  date  of  their  discovery 
without  changing  the  Daily  Balance  Book  for  the  en- 
tire intervening  period. 

3.  Disadvantages: 

a.  Requires  all  checks  to  be  entered  on  both  sides  of 
Cash  Book. 

b.  Requires  the  use  of  Daily  Balance  Book  to  record 
total  cash  avails. 

Note — In  the  case  just  outlined,  the  cash  book  balance  repre- 
sents the  amount  of  cash  in  the  drawer  only,  and,  in  order  to 
have  a  record  of  the  total  cash  avails,  it  is  necessary  to  provide 
some  sort  of  an  auxiliary  record  which  will  combine  the  cash 
and  the  bank  items. 

This  record  usually  takes  the  form  of  a  Daily  Balance  Book 
into  which  a  complete  record  of  both  the  cash  and  the  bank 
items  is  made. 

In  form,  the  book  would  be  ruled  similar  to  the  following  and 
would,  possibly,  be  printed  with  three  forms  on  a  page,  allowing 
six  forms  to  be  displayed  when  the  book  is  opened  as  this  num- 
ber answers  for  a  week's  balances. 

DAILY  CASH  BOOK,  THURSDAY 191 

Bank  Balance,  Brought  forward $00.00 

Cash  Balance,  brought  forward 00.00 

Cash  Receipts : 

* $00.00 

00.00 

00.00      00.00 


$00.00 
Less: 
Cash  Payments : 

* $00.00 

00.00 

00.00      00.00 


$00.00 
Cash  Avails : 
Bank: 

Balance,  as  above _ $00.00 

Deposits  00.00 

Withdrawals  , 00.00    $00.00 

Cash : 

Checks  $00.00 

Currency   00.00 

Specie  00.00      00.00      00.00 


$00.00 


*  One  line  to  correspond  with  each  column  in  cash  book. 
77 


SYLLABUS  OF  BOOKKEEPING  16  D  4 

4.  Special  Methods. 

a.  Slip  System. 

i.  Explained:   Duplicate  deposit  slips  and  carbon  copy  of  checks 
aie  posting  mediums. 

2.  Operation:    Posting  is  made  from  slips,  as  above,  and  ab- 
stracts are  prepared  for  summarising  entries. 

3.  Specific  Use:    Concerns  selling  S.  D.  B.  L.  only,  who  handle 
no  specie  and  pay  all  bills  by  check. 

4.  Advantages:    No  lost  motion. 

5.  Disadvantages:   Liable  to  be  misused. 


78 


SYLLABUS  OF  BOOKKEEPING  16  Q 


QUESTIONS 

1.  What  are  the  objects  of  a  Journal  and  what  changes  have  occurred  in 
its  use  and  form? 

2.  Describe  the  different  forms  of  Explanation  Columns. 

3.  In  what  different  ways  may  the  entry  be  made? 

.4     Describe  different  possible  arrangements  of  money  columns. 

5.  What  advantage  is  derived  by  having  the  money  columns  widely 
separated? 

6.  Describe  a  number  of  form  of  Sales  Records,  explaining  their  use  and 
respective  advantages. 

7.  Draft  a  journal  for  use  of  a  concern  which  sells  five  different  classes 
of  product  and  which  requires  a  supplementary  analysis  of  sales  to 
correspond  with  the  three  customers'  ledgers  which  they  operate 

8.  What  advantages  are  possessed  by  the  Sales  Slip  method  of  keeping  a 
record  of  sales  over  the  Sales  Book  Entry  method? 

9.  What  is  the  purpose  of  the  Purchase  Record  and  what  forms  may  it 
take  ? 

10.  Draft  two  or  more  forms  of  Cash  Records  and  explain  their  use  and 
'  purpose. 

11.  Describe  the  Slip  System  of  handling  cash  receipts  or  cash  payments. 

12.  A  Milwaukee  corporation  has  twenty  sales  ledgers  and  desires  to 
adopt  a  system  of  sectional  balancing  so  that  each  ledger  may  be  bal- 
anced separately  each  month.  Outline  and  illustrate  the  use  of  tli£ 
system. 


79 


SYLLABUS  OF  BOOKKEEPING  17  A 

17.  MISCELLANEOUS  BOOKS  OF  ACCOUNT  (Cont'd): 
A.  Final  Records. 

1.  Ledger. 

a.  Defined:    A  book  which  contains  the  final  entries  of  a 
business,  summarizing  them  under  appropriate  headings. 

b.  Subdivisions. 

i.  General  Ledger. 

A.  Defined — The   principal   ledger   of  a   concern,   containing 
all  accounts  which  convenience  has  not  thrown  to  other 
books. 
2.  Private. 

A.  Defined — A  ledger  usually  kept  to  centralise  control  of 
the  books  of  account,  and  keep  much  of  the  information 
contained  therein  private. 

B.  Component  Parts. 

1.  All  accounts  which  do  not  change  from  day  to  day  in 
the  ordinary  course  of  business. 

Illustration — Real  Estate,  Plant,  Bonds  Payable. 
Note — Accounts  indicating  progress  or  which  constant- 
ly  change   are   kept    in   the   general   or    its    subsidiary 
ledgers. 

Illustration — Sales,  Purchases,  Accounts  Receivable,  or 
Accounts  Payable,  are  kept  in  the  general  ledger. 

C.  Operation. 

i.  To  Open — Transfer  all  accounts,  desired  in  the  private 
ledger,  from  the  general  ledger  and  place  controlling 
and  adjustment  accounts  (See  12  C)  in  each  to  make 
each  self -balancing. 

W9  'Demonstration — Given  the  following  Trial  Balance. 
Open  Private  and  General  Ledgers,  making  each  self- 
balancing  : 

*A   Capital  $  $  40,000.00 

Sales    50,000.00 

Accounts  Receivable  20,000.00 

*Plant  12,000.00 

Cash  1,000.00 

Expense    7,000.00 

♦Drawings 5,000.00 

Purchases   30,000.00 

"•Inventory    30,000.00 

Accounts  Payable  5,000.00 

*Notes    Payable    10,000.00 

$105,000.00    $105,000.00 

*In  Private  Ledger. 

2.  To  Record  Private  Transaction. 

a.  Where  Private  Ledger  only  is  affected,  treat  as  in 
ordinary  books. 

Illustration — Plant  is  sold  for  $400,  and  cash  is  placed 
in  private  cash  account. 

Private  Journal 

Dr.  Cash  $400.00 

Cr.  Plant $400.00 

b.  Where  general  ledger  accounts  are  effected  also,  ad- 
just the  proper  account  in  the  private  ledger  and  put 
complimentary  entry  in  general  ledger  controlling 
account. 


80 


SYLLABUS  OF  BOOKKEEPING  17Alb2C2b 

Illustration — "A"  draws  $500.00  for  personal  use. 
Private  Journal 

Dr.  "A"  Drawing  $500.00 

Cr.  General  Ledger  Cont.  Account  $500.00 

Simultaneously    adjust    proper    account    in    General 
Ledger  and  place   complimentary   entry  in   Private 
Ledger  Adjustment  account. 
Illustration — 

General  Journal 
Dr.  Private  Ledger  Adjustment  Ac...$500.00 

Cr.  Cash  $500.00 

j.  To  close;  transfer  all  accounts  from  General  Ledger 
to  Private  Ledger  through  the  adjustment  and  con- 
trolling accounts ;  close  books  as  ordinarily,  then  trans- 
fer accounts  desired  in  General  Ledger  back  to  General 
Ledger. 
Illustration — 

Dr.   Sales  $50,000.00 

Accounts  Payable  5,000.00 

Private     Ledger     Adjustment 

Account  2,500.00 

Cr.  Accounts  Receivable  $20,000.00 

Expenses    7,000.00 

Cash  500.00 

Purchases   30,000.00 

In  Private  Ledger,  make  an  entry  just  the  reverse  of 
this.    The  Private  Ledger  will  then  contain  all  accounts. 
Close  books  as  usual,  then  make  an  entry  in  both  sets 
of  books  to  open  General  Ledger  again. 
3.  Subsidiary  Ledgers. 

A.  Defined — A    ledger   operated   to   remove   many   ac- 
counts of  a  class  from   the  general  books  so   they 
may  be  treated  as  a  unit,  instead  of  individually  by 
the  aid  of  Controlling  accounts. 
See  12  C. 

B.  Original  and  Final  Records. 

1.  Bills  Receivable  Register. 

a.  Form. 

Note — Date ;  Payee  ;  Maturity  Date  ;  Serial  Number ;  Folio  ; 
Amount ;  Credits,  Current  Month ;  Succeeding  Month ;  Third 
Month ;  Balance  carried  to  new  page. 

b.  Operation. 

Note — List  all  notes  in  order  of  their  date,  giving  each  a  num- 
ber corresponding  to  the  entry  number,  posting  each  to  the 
credit  of  the  proper  accounts.  At  the  end  of  month,  complete 
the  equilibrium  of  the  books  by  posting  the  total  of  the  notes 
recorded,  to  the  debit  of  the  Notes  Receivable  account  in  the 
General  Ledger.  If  Accounts  Receivable  controlling  account  is 
used,  it  must  be  credited  with  the  amount. 

c.  Advantages. 

1  Facilitates  recording  notes  and  saves  posting. 
2.  Enables  note  entries  to  be  easily  identified  when  posting  pay- 
ments, as  note  number  may  be  entered  in  Cash  Book. 

2.  Sundry  Debtor  Register. 

a.  Form. 

Note — Date  ;  Creditor's  Address ;  Serial  Number ;  Amount,  Dr. ; 
Credits,  Current  Month ;  Succeeding  Month ;  Third  Month ; 
Balance  carried  to  new  sheet. 

b.  Operation. 

Note — Similar  to  17  B   1   b,  although,   in  general,  postings  are 


81 


SYLLABUS  OF  BOOKKEEPING  17  B  2  b 

made  to  Sundry  Debtor's  Register  from  Sales  Books,  or  Sales 
Register.  This  may  be  eliminated,  but  doing  so  seems  to 
facilitate  fraud. 

c.  Advantages:    Saves  space  and  facilities  balancing. 

3.  C.  O.  D.  Register. 

a.  Form, 
i.  Local. 

Note — Customer,  Address,  Number,  Amount  Dr. ;  Credits  :  Cash, 
Returns,  Holdovers.    A  sheet  or  book  for  each  driver. 

2.  Out  of  Town. 

Note — Customer  ;  Address  ;  Collecting  Agent ;  Number  ;  Amount, 
Dr. ;  Credits :  Current  Month  subdivided  under  Cash  and  Re- 
turns ;  Succeeding  Month  subdivided  under  Cash  and  Returns ; 
Balance  carried  forward. 

b.  Operation.    Same  as  Sundry  Debtor  Ledger. 

c.  Advantage.    Same. 

C.  Special  Classified,  Tabular  or  Columnar  Journal. 

1.  Denned:  A  form  of  journal  arranged  with  columns  for 
each  class  of  items  which  occurs  with  great  frequency. 

2.  Object:  To  reduce  postings  and  simplify  work  when 
inexperienced  persons  keep  accounts. 

3.  Disadvantages :  Too  cumbersome  unless  each  book  is 
restricted  to  a  particular  class  of  items,  as  all  sales  in 
a  sales  book,  except  where  business  is  very  small. 

See  16  B,  C,  D. 

4.  Subdivisions. 

a.  Cash  Journals. 

i.  Defined:  A  journal  containing  columns  for  all  prominent 
amounts  including  cash,  wherein  all  original  entries  of  every 
kind  arc  recorded. 

2..  Form. 

A.  Date;  Explanation;  Folio;  Cash,  Dr.  and  Cr.;  Accounts 
Receivable,  Dr.  and  Cr.;  Bank,  Dr.  and  Cr.;  Purchases; 
Sales:  Expenses,  Miscellaneous:  Accounts,  Folio,  Dr. 
and  Cr. 

B.  Miscellaneous,  Dr.;  Bank,  Dr.;  Cash,  Dr.;  Purchases; 
Expenses;  Accounts  Receivable,  Dr.;  Folio;  Explanation; 
Folio;  Accounts  Receivable,  Cr.;  Bank,  Cr.;  Cash,  Cr.; 
Sales;  Miscellaneous,  Cr. 

Note — All  debits  on  Left  and  all  credits  on  Right  facilitates 
proving  totals. 

3.  Specific  Use;  Small  Business. 

b.  Check  Register. 

1.  Defined:  A  register  of  checks  issued  showing  their  distri- 
bution and  usually,  also  the  bank  account  in  detail. 

2.  Form. 

Note — Deposits,  Balance,  Check  Number,  Withdrawals,  Payee, 
Folio  or  Voucher  Number,  Dr.  General  Ledger,  Accounts  Pay- 
able or  Voucher  Payable  Ledger,  Expenses,  etc. 

3.  Advantages. 

Note — Places  all  checks  together ;  eliminates  necessity  of  check 
stubs ;  contains  bank  account  in  detail. 

c.  Voucher  Register  and  Distribution  Book. 

r.  Defined:  A  register  of  accounts  payable,  each  of  zvhich  is 
represented  by  a  separate  vcucher,  wherein  incoming  in- 
voices or  statements  are  distributed  to  proper  expense  or 
other  accounts. 

2.  Advantages:  Simplifies  entering  bills  and  facilitates  their 
payment. 

3.  Form. 


82 


SYLLABUS  OF  BOOKKEEPING        17C4c3A 

A.  Where  all  credit  items  are  posted  direct  to  the  ledger. 
Note — Date,  Credit  accounts,  Explanation,  Folio,  Amount, 
Voucher  Number,  Purchases,  Dr. ;  Manufacturing  Ex- 
pense, Dr. ;  Selling  Expense,  .Dr. ;  Administration  Ex- 
pense, Dr. ;  Miscellaneous  subdivided  under  Account, 
Folio,  Amount. 

Note — This  form  is  for  use  where,  for  financial  or  other 
reasons,  each  invoice  is  not  paid  separately  and  when 
ledger  accounts  are  desired.  It  enables  the  incoming 
vouchers  to  be  filed  numerically  and,  when  the  voucher 
number  is  shown  in  the  ledger,  facilitates  finding  specific 
items  quickly. 

B.  Where  most  or  many  of  the  items  are  treated  individually. 
Note — Date ;  Account ;  Explanation  ;  Folio ;  General 
Ledger,  Cr. ;  Voucher  Payable,  Cr. ;  Voucher  Number ; 
Paid;  Debits  same  as  before. 

Note — Folio    or    Paid    columns   both    are    never    used    in 
connection  with  any  item,  hence  may  be  combined  in  one 
column. 
4.  Operation. 

Note — Each  incoming  invoice,  or  statement  if  they  are  grouped, 
is  attached  to  a  voucher  jacket,  and  given  a  number  correspond- 
ing with  the  line  in  the  Voucher  Register  on  which  it  is 
entered.  It  is  filed  first,  before  entering,  on  an  arch  file  await- 
ing arrival  of  the  statement.  Second,  it  is  jacketed,  entered 
and  filed  in  an  "Unpaid  Bills  File,"  either  according  to  matur- 
ity or  numerically.  When  paid  it  is  filed  in  the  Paid  file  numer- 
ically for  future  reference.  Where  a  Combined  Check  and 
Remittance  Letter  is  used  (See  Accounting  Principles — Voucher 
Checks).  The  carbon  copies  of  the  check  and  letter  may  be 
filed  alphabetically  as  an  index  to  the  voucher,  or,  H  it  is 
preferred  to  file  the  vouchers  alphabetically,  the  duplicates  may 
be  filed  numerically  as  a  cross-reference. 


83 


SYLLABUS  OF  BOOKKEEPING  17  Q 


QUESTIONS 

1.  Differentiate  a  ledger  and  a  journal. 

2.  Explain  how  a  general  and  a  private  ledger  may  be  operated  simul- 
taneously relating  to  the  accounts  of  a  particular  firm. 

3.  Refer  to  question  10,  chapter  15.  Which  items  would  you  show  in 
the  private  ledger  and  which  in  the  general  ledger ;  also  which  might 
be  controlling  accounts  of  subsidiary  ledgers? 

4.  Of  what  particular  advantage  is  a  private  ledger? 

5.  Trial  Balance  of  the  "X  Y"  Co.,  June  30,  1914. 

Private  Ledger. 

"X"  Capital  $  $   240,000 

"Y"   Capital  160,000 

Plant  and  Machinery  187,500 

Material  per  inventory  June  30,  1913 102,625 

Notes   Payable 5,500 

General  Ledger  Controlling  Account 115,375 

$  405,500       $  405,500 

General  Ledger. 

Sales   $  $   657,025 

Purchases  240,000 

Labor  172,500 

Office   Salaries   35,000 

Traveling  Expenses  12,000 

Interest    3,000 

Stationery  and  Printing  875 

Rent  and  Taxes  21,000 

Discount  and  Allowances  11,250 

Fuel    23,000 

Insurance    875 

Freight,   Inward  8,750 

Commission    31,875 

Advertising  2,500 

Notes  Receivable  30,575 

Accounts  Receivable  180,575 

Accounts  Payable  39,250 

Cash  37,875 

Private  Ledger  Adjustment  Account 115,375 

$  811,650       $  811,650 

Depreciation  on  plant  and  machinery,  5% ;  unexpired  insurance, 
$375.00;  bad  debts,  $1,625;  inventory  of  material  on  hand,  June  30, 
1914.  $98,025. 

Given  the  above  trial  balance  of  the  private  and  general  ledgers 
of  the  "X  Y"  Co.,  prepare  journal  entries  to  close  both  books,  also 
prepare  profit  and  loss  account  and  balance  sheet. 

6.  Explain  the  operation  of  a  bills  receivable  register  and  tell  of  its 
advantages. 

7.  How  is  a  sundry  debtors  ledger  operated  and  what  advantages  are 
derived  by  its  installation? 

8.  Under  what  conditions  is  a  cash  journal  used  to  advantage? 

9.  Two  forms  of  cash  journal  are  given  in  the  text.  Which  is  prefer- 
able? 

10.  Under  what  conditions  would  you  recommend  the  use  of  a  check 
register  and  what  advantage  would  you  claim  for  it? 

11.  Explain  the  operation  of  a  voucher  register  or  distribution  book  and 
tell  of  the  advantages  or  disadvantages  of  its  use. 

12.  What  are  the  advantages,  if  any,  of  the  voucher  record  over  the 
purchase  'eirrnal  used  in  connection  with  a  creditors'  ledger?  What 
is  the  relation  of  each  to  the  general  ledger? 


84 


SYLLABUS  OF  BOOKKEEPING  17  Q 

13.  Suggest  a  plan  whereby  a  department  store  might  adequately  control 
its  C.  O.  D.  business.  If  convenient  for  purposes  of  illustration,  submit 
forms. 

14.  What  items  are  listed  sometimes  as  accounts  receivable,  that  do  not 
properly  belong  in  such  a  list?  How  should  they  be  classed  in  the 
balance   sheet  ? 

15.  Explain  fully  the  use  of  a  private  ledger,  indicating  what  accounts 
are  usually  kept  therein. 

16.  Assume  that  the  private  ledger  of  a  trading  copartnership  contains 
the  capital  assets  and  liabilities,  the  partners'  accounts,  the  profit  and 
less  account  and  the  notes  payable  account.  State  the  procedure  for 
closing  the  general  ledger,  laying  particular  stress  on  the  disposition 
of  the  working  and  trading  assets  and  the  cash  transactions  affecting 
the  capital  assets  and  liabilities. 

17.  A  cash  book  exists  with  three  columns  on  each  side,  viz.:  Debit  side: 
Discounts,  Dr.,  Cash  Receipts,  Bank  Cr.  Credit  side :  Discounts,  Cr., 
Cash  Payments,  Bank,  Dr. 

in  making  an  audit,  you  find  that  the  cashier  closed  his  cash  book 
at  the  end  of  a  month,  bringing  down  a  cash  balance  of  $177.91 ;  you 
count  his  cash  and  find  that  he  has  only  $119.12.  On  going  carefully 
through  the  month's  transactions,  you  find  that  $45.37  paid  in  cash 
had  been  entered  in  the  bank  column ;  the  total  of  a  previous  page  of 
cash  receipts,  $2,516.25,  was  brought  forward  as  $2,525.75 ;  the  dis- 
count $2.50  on  an  account  paid  had  been  entered  in  the  cash  column 
as  a  payment  instead  of  in  the  discount  column ;  $10.00  received  from 
a  partner  for  payment  of  a  private  account  had  been  included  in  the 
cash  in  hand,  but  not  entered  in  the  cash  book. 

Rule  a  form  of  cash  book  as  above,  enter  the  balance  brought 
down,  and  make  entries  to  correct  the  errors  above  described.  Show 
the  deficiency  still  existing,  and  state  how  it  should  be  dealt  with. 

18.  Describe  what  is  known  as  the  voucher  system.  Can  a  voucher  sys- 
tem be  used  to  advantage  in  every  business?  If  not,  state  certain 
conditions  which  would  militate  against  it. 

19.  Criticize  the  arrangement  of  a  voucher  record  with  column  headings 
as  follows,  for  a  telephone  company :  Date ;  Voucher  Number ;  In 
Favor  Of;  Issued  For;  Paid,  subdivided  under  Date,  Check  No.; 
Amount  of  Voucher,  Credit  Accounts  Payable ;  Operating  Expenses, 
subdivided  under  Repairs  of  Wire  Plant,  Repairs  of  Equipment,  Sta- 
tion Removals  and  Changes,  Depreciation  of  Plant  and  Equipment, 
Other  Maintenance  Expenses,  Operators'  Wages,  Other  Traffic  Ex- 
penses, General  Office  Salaries,  Other  General  Expenses;  Intangibles; 
Lands  and  Buildings;  Central  Office  Equipment;  Station  Equipment; 
Exchange  Lines ;  Toll  Lines ;  General  Equipment ;  Undistributed  Con- 
struction Expenditures;  Plant  and  Equipment  Purchased;  Materials 
and  Supplies;  Depreciation  Reserve;  Miscellaneous,  subdivided  under 
Account  No.,  Account,  Amount. 

20.  Criticize  the  arrangement  of  a  voucher  record  with  column  headings 
as  follows,  for  a  college :  Date :  Voucher  No. ;  Fund  Paid  From ; 
To  Whom  Paid;  General  Ledger,  subdivided  under  Account,  Folio, 
Amount;  General  Expenses,  subdivided  under  Advertising,  Care  of 
Grounds,  Heat  and  Light,  Insurance,  Postage,  Printing,  Travel  Ex- 
pense, Officers'  Salaries;  Ooerative  Expenses,  subdivided  under  Farm, 
subdivided  under  Labor — Supplies,  Dairy,  subdivided  under  Labor — 
Supplies.  Horticulture,  subdivided  under  Labor — Supplies,  Poultry, 
subdivided  under  Labor — Fcrd,  Horse  Barn,  subdivided  under  Labor — 
Supplies,  Board  Departments,  subdivided  under  Labor — Supplies; 
Students'  Stationery  and  Supplies,  Janitors'  Supplies,  Janitor  Work, 
Salaries  of  Employees,  Educational,  subdivided  under  Salaries  of 
Instructors,  Apparatus,  Supplies,  Library  Books;  Maintenance  of 
Plant,  subdivided  under  Repair  Material,  "Stock,"  Main  Building, 
Chemical  Laboratory,  Grove  Cottage,  Cottage  No.  a,  Cottage  No.  b. 
Cottage  No.  c.  New  Dormitory,  Old  House,  Farm  House,  Farm  Barns, 
Agricultural  Laboratory;  New  Plant  and  Equipment,  subdivided  un- 
der Title.  Folio,  Amount;  Vouchers  Payable,  Cr. 


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